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ECONOMICS 

OP 

INDIA AND PAKISTAN 


BY 

Dr. S. M. AKHTAR. 

M. A. PH. D. (LOHbON) 

Head of the Department of Economics, Punjab University. 


PUBLISHERS UNITED 

176 Anarkali LAHORE (Pakistan). 



Published by 
Publishers United 
176, Anarkali, Lahore* 


Third Edition ; 1949 


By united arrangement copy rights of the other 
two participants in the last edition have 
been accluired for Pakistan by the present author . 


Printed by 
Sh* Umar Draz 
at the Imperial Printing Worki 
61 Railway Road, Lahore 



C O N T T S 


Chapter. india Pages. 

I The Geographical Background ... 1 

II Population .,. ... 21 

III Agricultural production ... ... 52 

IV Systems of land Tenure ... ... 75 

The Agriculturist and his Equipment ... 95 

VI Marketing of Agricultural produce ... 132 
'A^II Rural Finance and Indebtedness ... I5l 

VIII Co-operation ... ... 174 

IX The State in Relation to Agriculture ... 201 

X Famine and Famine Relief policy ... 212 

XI Land Revenue policy ... ... 232 

XII Industry ... ... 25 

XIII Large-scale Organised Industries ... 267 i- 

XIV Some Factors of Industrial Development... 307 

XV Industrial Labour ... ...331 

XVI Transport — Railways ... ... 370 

XVII Transport — Roads ... ... 39l 

XVIII Transport-Waterways and Airways ... 397 

XIX Co-ordination of Transport Sources ...-405 
XX The Trade ... ... 408 

XXI Indian Fiscal policy ... ... 444 

XXII Currency and Exchange ... . 473 

XXIII Currency and Exchange (contd.) ... 489 , 

XXIV Indian Currency and Exchange (contd.) 

Indian Paper Currency ... ... 506 

XXV Indian Currency and Exhange (contd.) 

World War II and After ••• 5l5 

XXVI Banking and Credit ... ... 536 : 

XXVII Prices ... ... 577 

XXVIII Public Finance ... ... 600 : 

XXIX Effects of war on Indian Economy ... 665 , 

XXX Post War Construction ... ... 678 



ECONOMICS OF PAKISTAN 


Chapter Pages 

I Area, Population and Natural Resources 1 
II Agriculture and Agricultural Production 10 

III The Problem of Land Reform in Pakistan 23 

IV Industries and Industrial Policy ... 29 

V Industrial Plans and Development ... 40 

VI Trade and Foreign Exchange ... 52 

VTI Transport and Communications ... 66 

VIII Currency, Banking and Industries ... 78 

IX Prices in Pakistan ... ... 89 

X Finances of the State ... ... 98 



PREFACE 


Although since the partition our main interest 
lies in the economic development of Pakistan, it has been 
found advisable to bring out in a new edition under a 
new name of what was once called the “ Indian Econo- 
mics.” For the citizens of Pakistan the study of Indian 
Economics is still of great value. We have inherited our 
economic structure and problems from the days when 
Pakistan formed a part of what was then India. We 
have had the impact of the same influences historical, 
political and legal and our problems are in many respects 
similar. Every economic problem of Pakistan when 
looked at in its historical perspective, must lead us to 
the study of conditions as they obtained in undivided 
India. In some respects regions now forming a part 
of the Indian Dominion, have travelled further than 
Pakistan, specially as regards industrial development. It 
is interesting to know why those particular portions 
progressed more than the Pakistan areas and how we 
can avoid mistakes made in the course of their deve- 
lopment. 

Further, the economies of the two Dominions are 
complementary to each other and for the proper under- 
standing of the one, the study of the other cannot be 
neglected. Some of the chapters of the original book 
have been deleted because they were not considered of 
fundamental value from the point of view of our 
problems. 



VI 


ECONOMICS OF INDIA AND PAKISTAN 


Since the partition Pakistan has had to start her 
life as an independent economic unit. Certain conse- 
quences followed the partition itself. It was necessary 
therefore to study the problems now faced by Pakistan 
in the light of our own needs and aspirations. For this 
purpose a separate volume ‘Economics of Pakistan’ has 
been written which is a much smaller piece of work 
because much of the material pertaining to Pakistan had 
already been incorporated in what is now ‘Economics of 
India and Pakistans’. 

Dec. 20, 1948. 

Deptt. of Economics. 

University of the Punjab. 

Lahore. 



CHAPTER I 


THE GEOGRAPHICAL BACKGROUND 

Geographical Influences on Indian^ Economic Life ; A 

country is said to make its inhabitants.^ We might amplify it by 
saying that the natural environments of a country have a pro- 
found influence on its economic life in all its aspects. Economic 
activities of a people are vitally affected by the natural forces 
operating in their country. The climate affects the efiiciency of 
labour and determines the extent of the market for certain goods 
connected with food and clothing ; it, together with rainfall and 
the nature of the soil, decides as to what crops will be sown. 
Geological conditions and river systems are the outcome of 
the peculiar physical features of a country. All these put together 
determine the volume and the course of trade and industry 
which, in their turn, affect the government finances and the 
governmental activity. Thus all economic and the political 
phenomena are the outcome of the natural environments. 

But man may conquer nature. He has spanned the seas and 
cut the mountains ; he has conquered the air ; he can travel 
under water ; distance has been annihilated by the fast means of 
locomotion. By electricity he has turned the night into day and 
toned down the rigours of climate. Through his irrigation 
schemes, he has tried to secure his independence from nature in 
the matter of rain. His soil reclamation schemes have been 
intended to overcome the limitations imposed by the nature 
of the soil ; even European soil has been exported to the New 
World. Mighty forces of Nature have been harnessed into the 
service of mankind. These miracles of man will fill an epic. 

This mastery of man over nature is not, however, complete 
and unquestioned. Nature has a knack of escaping from the 
chains and asserting her sovereignty. Air operations are hampered 
by weather conditions, sea sometimes becomes ice-bound and no 
longer navigable ; a hail storm or a flood may undo the work 
accomplished by human labour and ingenuity. An earthquake 
upsets human plans. Thus we have been able to conquer nature 

1. In this portion “India” stands for the sub-continent of India as 
under the British. 

2. See Houldcrness, T.W., Peoples and Problems of Indian 1923. 



2 


ECONOMICS OF INDIA AND PAKISTAN 


only partially and nature’s influence on economic activity cannot 
be ignored and completely eliminated* 

On the economic life of the Indian continent nature’s 
influence has been dominant* The Himalayas affect rainfall 
which, in its turn, governs agricultural operations throughout the 
country. The nature of the coast line and the land frontier has 
an influence on the direction and volume of trade. Configura- 
tion and geology cause the mineral wealth of the country to be 
what it is, and they are also responsible for the resources of 
power available to Indian industries. Efficiency of Indian labour 
is in no small measure affected by Indian climate which also 
determines the fauna and flora of the country. Indian budget is 
said to be ‘‘ a gamble in the monsoons.” Thus Indian agriculture, 
trade, industry, finances, and what not, are all the result of the 
natural enviroments of India. Really it is difficult to think of any 
aspect of Indian economic life which is not directly or indirectly 
influenced by the natural factor. 

2. 4 few Geographical facts about India: — size, location, etc : 
The first thing that strikes one is the vastness of the size of the 
country and its continental dimensions. The total area of India 
(excluding Burma) is 15,72,000 square miles* . This area is equal to 
that of Europe minus Russia ; it is more than twice the combined 
areas qf five leading countries of the world, viz., Japan, Germany, 
France, Italy and the United Kingdom ; or it is more than twelve 
times that of Japan and more than twetity times that of the 
United Kingdom.^ She has a land frontier of 6,000 miles and a 
coast line of 4,500 miles* Her length and breadth are 2,000 and 
2,500 miles, respectively. It is not only in size that she is big ; she 
is the home of one-fifth of the human race. She is thus hot a 
country but a cont;inent. * ' , 

Besides, India is a country which presents all types of con-* 
trast;s* Some of her regions are rainless ; others there are which 
get the heaviest rainfall in .the world. Her climate varies from 
the icy cold, or teniperate to the tropical* Malabar, with its 
\hxuriance, is a marked contrast to some treeless plains in 
the Punjab. Density of population varies from about five 
persons per square mile in Baluchistan to 814 in Cochin State, 
oandy deserts of Rajputana are a contrast to valleys like Kash- 
Pathan from the' Frontier, his stature and 
complexion, and a Madrasi or a Bengali and you wonder whether 
they can possibly belong to the same land, especially when they 
cannot talk to each other* India has been rightly described as 
the epitome of the world. ' 



GBQGRAEHICAL- BACKGROUND: 


3 


But there is a unity underlying ail this divet^ity. ' This 
divetsity- enriches our economic and social life and if places 
before us vast and almost unlimited potentialities of developing 
an economic life of infinite variety and richness* It is, therefore, 
a welcome contrast* 

India’s geographical location is exceptionally favourable. She 
occupies a central position in the Eastern Hemisphere. She is 
equdly distant from the West through the Sue 2 Canal .and from 
the Far East, as also equally distant from Australia and Africa. 
She thus undoubtedly occupies an excellent position for purposes 
of trade. • feature obviously meant India to serve as a distributing 
centre for a large volume of the world trade. In short, India 
seems to be marked out by nature to be a big and important 
country. , ' 

3, Three Natural Divisions : There are three well-marked 
natural divisions of India : (1) the Himalayan region ; (2) the 
Indo-Gangetic plain ; and (3) the Deccan. 

India is bordered on the North by the Himalayas — a conti- 
nuous range of mountains 1,500 miles long and 100-250 miles 
broad — which were once submerged under water. In their height 
they have no parallel in the world. Their highest peaks are 
Mbuint Everest over 29,000 ft., Kinchingjinga nearly 28,000' ft. 
and Dhavalagir 27,000 ft; They have more than 140 peaks higher 
than', Mount Blanc which is the highest peak of Europe.^ The 
Hihxdlayas constitute almost a continuous defence wall, having 
only k few passes few of which are less than 1,700 ft. high. j 

The Himalayas* are a big and Muable gift given to us by 
nature. This mountain range, gives us rain ; it is a mysterious 
soufce and feeder of numerous fertilizing rivers and streams, and 
it has an immense influence on the meteorological conditions of 
the country. It tones down the high temperature of our plains ; 
it obstructs the cold dry winds from the North ; it shuts the 
fertile and rich plains of India from the unwelcome and greedy 
gaze of hungry prowlers ranging abroad ; its wealth of forests and 
pastures is simply priceless. It nas given us valleys like Kashmir, 
which is a veritable heaven on earth. 

. The Indian eyes look at it with awe. The influence of the 
Hipialayan range on the economic life of the country cannot 
possibly be exaggerated. But it is not merely a physical barrier 
between India and the North beyond ; it is also a social and 
cultural barrier, and it has made the. Indian civilization unique* 
Such is the significance of the Himalayas to us. 

1. See Dubev, R., EconoimiG Geo^rabhy of Indian 1941, p* 24. 



4 


ECONOMICS OF INDIA AND PAKISTAN 


4. The Indo-Gangetic Plain : Another striking and important 
feature of India is the Indo-Gangetic plain with its alluvial and 
fertile soil and its unfailing river system. It is one of the 
biggest level plains of the world being about 1,500 miles long and 
150 miles broad. It is literally the “ dust” of the mountains.^ 

It is almost an uninterrupted level plain stretching from the 
Indus in the West to the delta of the Ganges in the East. The 
western part is arid and dry, and as we move from the West to 
the East, through the Punjab and U.P. to Bengal, wheat and sugar 
fields give place to bamboos, palms and plantains ; and further 
East Assam is the home of a thriving tea industry. The eastern 
part is greener, more picturesque and has an abundance of 
water. 

This Indo-Gangetic plain is the richest source of the crops 
that India grows. It is here that flourishing agriculture is carried 
on to feed our industries with essential raw materials. The 
alluvial soil has made it possible for a splendid system of irriga- 
tion to be developed here. It was the richness of this plain that 
attracted Aryan hordes from Central Asia. It is said to be the 
seat of the ancient Indian civilization. Livelihood here was won 
without toil and man had leisure to turn to art and literature. 
It contains regions of very dense population and has given rise 
to big, prosperous and important cities. We can gauge the 
importance of this plain to Indian economic life from the 
fact that India is predominantly an agricultural country and this 
plain is the seat of Indian agriculture. The three rivers, the 
Ganges, the Indus and the prahmaputra, that flow through it, are 
a great national asset. 

Deccan ; The Southern natural division of India, 

T j* the Deccan, is rocky and broken. These are the oldest 
Indian rocks ; they were there when the rest of India was under 
water ; the average height is 2,000 ft. above the sea level They 
have two distinct parts ; The Western Ghats and the Eastern 
Ghats. The Western Ghats are steeper. They rise to an average 
4,000 ft* after leaving a thin strip of plain along the 
^ Eastern Ghats are, on the other hand, less steep and 
less high and leave a little broader plain along the coast line. 
Most of the rivers of the Deccan rise in the Western Ghats, 
those that flow towards the west are short and fast, and those 
that how towards the East are longer and flow a little slowly. 

It is in the Deccan that black cotton soil occurs, which in 
the valleys is particularly fertile. Many a rich crop is grown here. 

1. HonMArnpqs. T. W.. Peonles and Problems of India. 1923. P. 34* 



GEOGRAPHICAL BACKGROUND 


5 


The deltas of Kistna, Godavary and Cauvery are very productive. 
Towards the extreme South in Malabar and Tanjore we meet 
with tropical luxuriance. This ancient part of our land has made 
no mean contribution to the infinite variety and richness of out 
economic life. 

6. Climate : One of the most important factors that 
influence the economic life of a country is the climate. The 
distribution of natural vegetation, the product of land and 
animal, the working capacity of man, human wants and the 
location and distribution of industries are some of the conse- 
quences of the climatic factor. 

India enjoys a variety of climate, cold in the hills and the 
extreme North, hot and dry in the plains, with a wide range of 
temperatures, and damp in the South with temperature more or 
less uniform. You cannot give one name to such a climate. It 
may be called semi-tropical or a combination of the temperate 
and the tropical. But it is dangerous to generalize. 

We owe it to our climate that we can grow such a large 
variety of crops and lay the foundation of many a prosperous 
industry. It is our climate which makes the goal of economic self- 
sufficiency appear within reach, if we wish to pursue it. But 
Indian climate is said to have an enervating influence on the 
human system ; it makes the people listless, lethargic and incap- 
able of a vigorous and sustained effort. It is said that a tropical 
mind is a sleepy, and an inert mind. But we should not 
exaggerate this adverse influence of our climate and attribute our 
economic backwardness to it. It is under a similar climate that 
Indians in ancient times reached the pinnacle of glory in the 
realm of art and literature, medicine, trade and industry. For the 
causes of our economic backwardness, therefore, we must look 
elsewhere. 

7, Rainfall : The importance of rainfall to an agricultural 
country like India can hardly be exaggerated. It is not for 
nothing that an Indian peasant in a difficulty always looks above 
for relief. The God of an illiterate Indian is supposed to reside 
in the clouds. Rain must be timely ; it must be sufficient, but not 
too much, and it also must be evenly distributed. Failing any of 
these things, the Indian farmer faces misery. Indian rainfall is 
said to show all the vagaries of an oriental potenate. We must 
understand that failure of nature in this respect may spell ruin 
to millions of people who depend upon agriculture. But it is not 
only the agriculturists who suffer. Failure of crops means curtail- 
ing of demand" for goods ; it means depression ; it results in the 



6 


ECONOMICS OF INDIA AND PAKISTAN 


reduction of Government revenue, which, in its turn, means 
contraction of Government aictivities and retrenchment. The 
effects are very far-reaching indeed and permeate the whole of 
our economic life. Sir Guy' Fleetwood Wilson described the 
Indian budget as “a gamble in the rains” and he was perfectly 
right. 

The rainfall in India shows considerable variations ; and its 
dis.tributionis very unequal throughout the country. The average 
annual rainfall varies from 3 inches in Sind to 460 inches in 
Cherrapunji, There are regions of very heavy rainfall like Assam, 
Eastern Bengal and Western Ghats ; there are regions of pre- 
carious rainfall like a part of the Punjab, Bombay and U.P, ; and 
then there are regions of deficient rainfall or drought as Western 
Punjab, Sind and Rajputana. 

Most , of the rain in India comes from the monsoons, the 
Arabian Sea monsoon, and the Bay of Bengal monsoon ; but the 
former is more, important and causes 90 per cent of the rainfall in 
India. Indian, raipfall not only varies from place to place but the 
intensity of tlxe tnonsoon' varies from year to year. Out of a cycle 
of five 'years, ‘it is said, one is good, another bad and three 
neither good nor bad. In one year the current may be too strong 
and cause floods^ and in another year it niay cause drought. Still 
Another remarkable feature of our rainfall is that it is seasonal. 
London, for e^cample,. gets 24 inches of its annual rain in 161 
days' in light drizzles leading to considerable 'sihkihg, while 
Boinbay’s 71 inches corne in 75 days only.^ Thus most of our 
rain water coming in torrents’ is washed down and wasted. 

S* Seasonjs : Seasonal variations have an intimate bearing 
on economic life.. Diet and dress depend upon them. They are, 
therefore, of no slight importance in determining the demand 
for agricultural and industrial goods. Agricultural production, 
too, depends on seasons. 

There are three well-marked seasons in India with a short 
period of transition intervening between theiti. We have winter 
from November to February, which is comparatively dry and 
rainless,^ next , there is the hot dry summer from April to June, 
March , being the. transitional month ; then follows the rainy 
summer season from July to September,- October being the 
transitionaL, month. Again* here, as ip the case of climate, it is 
difficult to .geperalize ; there .arc some variations to be met with 
as between the North and the South and the East and the West. 

I* R.,‘Hcdndmic Geography of India, 1941, p. 2-Ca). 

i. The'ruiijab gets some faiwin winter, too. 



GEOGRAPHICAL BACKGROUND ■ 


7 


There is a much greater severity of seasons, for example, in 'the 
North than in the South* 

9, Soils : Indian soils can be broadly divided into three 

classes * ■ ' . ’ • 

(1) The Alluvial ~lt occurs in the Indo-Gangetic plain and the 

coastal strips of the Eastern and' the W estern Ghats. It is soft, 
deep and porous and can retain moisture* It has been fertilized 
by the washings of the rivers and it is consequently suitable for 
growing a great variety of crops. ^ '■ . ' ' 

(2) The Deccan Trap SoiL— It covers practically the whole of 
the Deccan. A greater part of Bombay Presidency, the whole of 
Berat, Western 'C.P. arid Hyderabad show this type of soil. On 
the hills the soil is thiri and hence poor and unproductive ; but 
down in the valleys of the riviers it is deep and remarkably fertile 
and can grow a rich variety of crops, especially cotton. 

(3) The Crystalline Soil— 'It occurs in the whole of Madras 

Presidency, South-East of Bombay Presidency; Orissa, Chhota- 
Nagpur, the major portion of C.P., half of Hyderabad, . Central 
India and some districts of Bengal 'and U.P. This soil is also 
called laterite as' it lies adjacent to laterite rocks. ^ Where rainfall 
is favourable or irrigation ‘facilities available, it yields a fairly 
large number of good crop's.' It shows wide variations ‘of depth, 
consistency and fertility. ' ’ 

In addition to these may be mentioned the desert soils whjch 
occupy large tracts', in eastern Sind, Rajputana and South Punjab. 
Then there are two alkaline soils known as Reh or Kalar in Sind 
and the Punjab. They ‘'have a high degree of impermeability and 
'' stickiness^’ together with high alkalinity and frequent presence 
of large excess p{ free salt^s.’;^ , They are ^ poor, in nitrogen and 
humus, hence unsuitable for crop growing ^without previous 
reclamation. - . , • , ' . 

In recent years considerable work has. been done on Ipdian 
soils with the object of their classification and , investigation of 
their crop producing powers. The irpportapce of soil surveys and 
soil mapping is being more and more recognized. At the Imppial 
Agricultural Institute at Delhi a soil map of India hais been 
prepared and an all-India scheme of soil survey has recently been 
launched. . . , . 

10. Forest Resources : India has got a very valuable pro- 
perty in its Vast and varied forest wealth. The total area under 


1 Irt/iinn Ya/ir Rnnh ^ n 




8 


ECONOMICS OF INDIA AND PAKISTAN 


the control of the Forest Department in British India on 31st 
March, 1941, was a little less than a lakh square miles (98, 1 
square miles), which represents 11*5 per cent of the total area. 

It has already been seen that Indian climate ranges from the 
tropical and sub-tropical to the temperate one. The variety in 
climate, topography, nature of the soil and other local factors arc 
responsible for the infinite variety of the forest types, scattered 
throughout the length and breadth of the country. 

11. Main types of Forests : The following main types of 
the forests can be broadly distinguished : 

(a) Alpine Forests.— These are the uppermost forests in the 
Himalayas to be found at the heights between 9,500 feet and 
12,000 feet. They consist of small trees and large shrubs. Silver 
fir, Blue Pine (only in patches) and ]unipers are also to be met 
there. This region supplies excellent grazing grounds in summer 
for goats and sheep. 

(b) Temperate Forests , — Wet temperate forests grow throughout 
the length of the Himalayas at a height between 5,000 and 11,000 
feet in the regions of very heavy rainfall They bear a striking 
resemblance to the ternperate forests of Europe and North 
America, Spruce, silver fir, deodar and blue pine are some of the 
trees found here. But most of these forests are inaccessible, and, 
under the present conditions of the means of transport, unecono- 
mical of exploitation. 

Dry temperate forests, consisting of scattered patches of oak, 
ash, deodar and silver fir at higher altitudes are to be found in 
Hazara, Kashmir, Chamba, Garhwal and Sikkim, where rainfall is 
usually less than 40 inches a year. 

(c) Sub-Tropical Forests. — There are wet sub-tropical forests 
consisting of oaks and chestnuts in the Eastern Himalayas and 
chir in the Western and Central Himalayas. 

The dry sub- tropical forests occur at a height between 1,500 
and 5,000 feet, the chief specie being the olive. Grazing, lopping 
and felling have impoverished these forests. 

(d) Tropical Forests . — The wet, ever-green tropical forests 
occur on the Western Ghats, wetter parts of Bengal, Assam and 
the coastal strips of Orissa. Teak and sal, mixed with many other 
species, are to be found in these regions. 

The dry tropical forests occur in several parts of the country 
where rainfall is deficient but temperature is high. Thorny trees 
like kikar grow in these regions. 



GEOGRAPHICAL BACKGROUND 


9 


_ Utility of the Forests : The Indian forests are a great 

national asset. Besides being useful in regulating the flow of 
rivers and preventing floods, regulating the air currents, improv- 
ing climate, the sanitary conditions and the beauty of the 
countryside, the forests supply timber for building purposes, fuel, 
and raw materials for paper, lac and match industries and many 
other valuable substances, such as bark for tanning purposes, and 
gum, dyes, drugs and some food products. Besides, they fertilize 
the soil and provide shelter for bird and beast. Wc may note in 
particular that we have got almost an inexhaustible source of 
bamboo which is a very suitable raw material for paper industry. 
Researches at Dehra Dun Forest Institute will no doubt bring out 
several further uses of our forest wealth. Co-ordination between 
forest exploitation and industrial planning is essential, if we are 
to make the best use of the vast and varied forest wealth of 
ours. 

13, Forest Administration : For a long time reckless des- 
truction of Indian forests continued and it was not realized that 
preservation of forests or their scientific management was highly 
conducive to the economic and physical well-being of the 
country. This realization dawned in about the middle of the last 
century. The Bombay Government appointed. a Conservator of 
Forests in 1847. The Government of India, issued a memoran- 
dum in 1855 laying down the lines of forest, conservation. A 
Conservator of Forests was appointed in Madras in 1856. . The 
Governor-General submitted to the Secretary of State in ,1862 
detailed proposals regarding the management of forests. Inspec- 
tor-General of Forests was appointed in 1863., . . 

The Forest Department controls more than one-tenth of the 
area of British India. The forests are classified as reserved, 
protected and unclassed. In the case of reserved forest areas the 
rights of the individuals as to the use of forests are completely 
recorded at the time of settlement operations and the boundaries 
are clearly demarcated. The Government exercises a very strict 
control over this area. In case of protected area the recotd of 
rights is not so complete, nor are the boundaries definitely 
demarcated. The public has greater freedom in the use of these 
areas. In the unclassed areas the Government control is the 
least. These areas are not subjected to scientific management. 

Sir Herbert Howard, Inspector-General of Forests in India, 
^has prepared a post-war development scheme for Indian forests. 
Every province is to launch plans of afforestation so that the 
forest area in India as a whole will increase by roughly a quarter. 



10 


ECONOMICS OF INDIA AND PAKISTAN 


Each village is to have its own forest area for the supply of 
timber, pastures and fuel* 

14* Mineral Resources : A wrong impression seems to 
prevail among some of our countrymen about our mineral 
resources. Some people seem to have an exaggerated notion of 
the quantity and quality of the minerals produced here. Let it 
be said at the very outset that our mineral resources are not so 
vast or unlimited as is sometimes supposed. 

But it is not to be supposed, on the other hand, that India’s 
mineral wealth is scanty or meagre. Even in this respect we 
occupy a fairly respectable position. 

15, Production of Minerals : The total value of the mine- 
rals produced in 1938 was Rs. 34,13,93,365 (£25,447, 116X^ The 
chief mineral products are coal, iron, gold, petroleum, manganese, 
tin, mica, lime, etc. The quantity and the value of the principal 
minerals produced in 1938, the latest year for which the figures 
are available, are given below : — 


Mineral 

Quantity 

Value 

Rs. 

Chromite 

44.149 

tons 

6,82,502 

Coal 

28342,906 

tons 

10,64,23,835 

Copper 

288,076 

long tons 

32,40,640 

EHamonds 

1,729 

carats 

68,813 

Gold 

321,138 

ozs. 

3,04.75,397 

Iron Ore 

2,743,675 

tons 

45,56,974 

Lead 

80,100 

tons 

1,67,36,720 

Magnesite 

25,611 

tons 

1,60,593 

Manganese 

967,229 

tons 

3,92,94,763 

Mica 

123,169 

cwts. 

42,04,633 

Monazite 

5,221 

tons 

2,33,700 

Nickle 

Petroleum (in- 

3,015 

tons 

11,06,323 

cluding Burma)^ 

274,664,365 

gallons 

5,95,06,155 

Silver 

6,181,000 

ozs. 

73,60,998 

Tungsten 

4,997-7 

tons 

80,22,748 


16, Iron Ores : Some Indian iron ore deposits are considereld 
to be the richest in the world, containing 60 per cent metal 
They occur in Singhbhum, Keonjher, Mayurbbanj, Bengal, Upper 

h Records of Geological Survey of India, VoL 74, Fart III* 1939, pp. 294 

2. On account of separation of Burma, Assam and the Punjab are our only 
sources- producing about 60 and 19 million gallons* respectively. 



GEOGRAPHICAL BACKGROUND 11 

Gondwana, the Deccan trap and the Himalayas. It is estimated 
that they contain about three thousand million tons of iron. 

17. Manganese : It is a very useful material and has been 
called the “ jack-of-all- trades.’’ It is required for enamel, 
porcelain, chemicals, plastics, varnish, glazed pottery, dry batteries, 
and what not. But its biggest consumer is the steel industry. 
Because our steel industry is not yet fully developed, most of the 
manganese produced in India is exported. Next to Russia, India 
is the largest producer. Within a generation the export of 
tmanganese has risen from 4,000 tons to 900,000 tons.^ Nagpur, 
Balghat, Bhandara and Chhindwara districts in the C.P., some 
parts of Bombay Presidency, Mysore, Madras Presidency, Bihar and 
Orissa are the chief places of its occurrence, 

18. Copper : It occurs in Chhota Nagpur, Singhbum, 
Rajputana, Sikkim, Kulu and Garhwal. From the extensive 
tracings of old workings, it can be inferred that there was flourish^ 
ing copper industry in India in the past. All the deposits are not 
workable, because some of them happen to be scattered in the 
form of grain, India’s contribution to the world copper supply is 
indeed very slight. 

19. Gold : Kolar field in Mysore is the only important 
source yielding about 3^000 ozs. Other fields are those of Hutti 
in the Nizam’s D^mrttiions, Anantapur in Madras ; but they are 
much less productive. 

20. Silver : Far from being a producer, India is the largest 
consumer of silver in the world. Only a slight quantity, say, 
25,000 ozs., is won from the Kolar field. Her annual imports of 
silver are of the average value of £10,000,000.'* 

21. Lead ; The lead ore deposits occur in Madras, Himalayas 
and Rajputana, and Manbhum, Hazaribagh in Bihar. But the 
total production of lead is almost insignificant, 

22. Mica : Mica deposits occur in Ajmer, Travancore, 
Mysore and Hazaribagh in Bihar and Nellore in Madras. Mica is 
extremely useful in the making of electrical goods. India has got 
the monopoly of mica in the world ; nearly the whole of it is 
exported, 

23. Chromite : India is well blessed by nature with chromite 
deposits It is an important mineral used for war purposes and up 
to the last war it was mainly used as a refractory material. As we 
are still industrially backward, there is very little home demand 

1. Wadia, D.N., Geology of India, 1939, p» 340. 

2. IMd., p. 351. 



12 


ECOISJOMICS OF INDIA AND PAKISTAN 


for it. Mysore State is the largest producer, other centres being 
Baluchistan and Singhbhum and also in some parts of Bombay and 
Madras. Our average annual consumption is 6,495 tons. But with 
the manufacture of aeroplanes and motor-cars, India will begin 
using more and more chromium. 

24. Other Mineral Products : Besides the above minerals, 
India possesses deposits of several types of clay having a high 
degree of plasticity, which are useful for making pottery, tiles, 
pipes and high-grade porcelain. China clay deposits are to be met 
with in Upper Gondwana, Bengal, Singhbhum, Mysore, Delhi and 
Jubbulpore. Fine clay of a high refractory quality is also 
available. 

Then, there are various kinds of sands available in several 
localities in the U.P. and Baroda State, and they are very suitable 
for use in the glass industry. 

We have got extensive and rich deposits of aluminium 
bauxite occurring in Assam, C.P., parts of Bombay and Madras 
Presidencies. But we have not tried so far, to any considerable 
extent, the reduction of bauxite into its metal aluminium. 

Our sources of salt are also very considerable. Salt is obtained 
from sea water in Madras and Bombay Presidencies, from the lakes 
in the interior, like the Sambhar Lake, and from the salt rock as 
in Khewra salt mine. Salt is a highly useful material for the 
making of chemicals. It is universally demanded for human and 
cattle consumption. 

25. Review of the Mineral Position ; The figures of pro- 
. duction given above are fairly striking. India is the largest pro- 
ducer of mica. Her iron ore is of the richest quality. She is the 
second largest producer of coal in the British Empire. High grade 
chromite is produced in large quantities in Baluchistan. We can 
safely conclude that our mineral resources can be counted upon 
giving a fairly strong support to any scheme of industrialization 
that we may launch. Most of the ores are being exported in a 
raw form at present, and we are not, therefore, making the best 
of them. As industrialization gathers momentum, many deposits, 
which are of little value now, will assume importance. 

26. Power Resources • Supply of cheap power is one of the 
most important requisites of industrial prosperity. India aspires 
to a high class industrialism. Let us see, therefore, whether she is 
properly equipped from the point of view of power for running 
the industrial machine. 



.GEOGRAPHICAL BACKGROUND 


13 


27, Sources of Power ; There are several sources from 
which energy can be generated, for example, wood, wind, water, 
alcohol, oil and coal Wind, which is being extensively used in 
the Netherlands in Europe, has not been made use of here 
so far. Alcohol may be produced in large quantities as a by- 
product of sugar industry, but at present it is of little importance 
as industrial fuel. Separation of Burma has impoverished us of 
petroleum, of which we now produce a very small quantity ; 
reliance on petroleum, therefore, as a source of power for our 
industries is hazardous. Wood is a fairly important source and 
Was put to considerable use in the past. But its only consequence 
was a reckless destruction of the forests with which afforestation 
did not keep pace. The forests of some countries of the world 
were soon denuded and the industrialists had to look elsewhere. 
We are, therefore, really left with coal and water as sources of 
energy, to the discussion of which we now turn. 

28. Coal : Nature has not been generous to us in the 
supply of coal resources. There are several shortcomings in this 
respect. Our resources are extremely limited, the quality of our 
coal is very inferior on account of its high ash content and 
presence of moisture, and the coal deposits are very unevenly 
distributed. 

29, Coal Output and its Distribution : Indian coal produc- 
tion in 1940 was 29 million tons.^ Jharia coal-fields accounted 
for a little less than 40 per cent and Raniganj about 30 per cent. 
Nearly 90 per cent was derived from the coal-fields of Bengal and 
Bihar alone. In 1937, Gondwana coal-fields supplied 98*14 per 
cent. Thus almost our entire coal supply is centred in one corner 
of such a big country. Coal is a bulky article and the cost of 
transport to certain industrial areas, as those in Bombay and 
Madras, is simply prohibitive. This imposes a serious handicap 
on industries in those areas. 

30. A warning of a probable shortage of Coal • We have 
been receiving, in recent times, repeated warnings of the probable 
exhaustion of our coal resources in the near future. In 1873, 
Mr. T.W. Hughes showed that area under coal in India was of 
the order of 35,000 square miles, Le., one-fifth of that of the 
world and three times as large as that estimated for Great Britain.^ 
But an estimate by Dr. Fox as to the total coal reserves of Lower 
Gondwana was 60,000 million tons.'^ Dr. Fox estimated the 

1. Review of the Trade of India, 1940-41, p* 53. 

2. Records of Geological Survey of India, Vol. VI, pp. 64-66. 

3. Memoirs of Geological Survey of India, Vol. LiX, 1934, pp. 343-44. 



14 


ECONOMICS OF INDIA AND PAKISTAN 


reserves of workable coal at 20,000 million tons, reserves of good 
quality coal at 5,000 million tons and of good coking coal at 1,500 
million tons only. Sir Lewis Leigh Fermor, in 1935, put the 
reserves of good quality coal at 4)500 million tons,^ With 100 per 
cent extraction) these reserves, according to Fermor, would last 
200 years* But it would be safer to put the extraction at 50 per 
cent and the reserves will, consequently, last 100 years only* The 
Indian Coal Committee, in 1937, estimated, however, that the 
reserves of good quality coal would last 122 years and that of 
coking coal only 62 years,^ Another expert has recently remarked 
that even with the imposition of restrictions on the use of 
good quality coal, India will experience a shortage of coal before 
the end of this century,^ 

31. Likelihood of new discoveries of Coal : It is possible 
that the geological surveys may lead to the discovery of some new 
deposits. The General Report of the Geological Survey of India 
for 1938 mentions the discovery in the Langrin area in Assam, of 
new deposits of coal ore, the workable seam of which alone has a 
total reserve of 80 million tons. Dr. D.N. Wadia of the Geologi- 
cal Survey of India thinks it probable that a large extent of 
coal-bearing Gondwana rocks lie hidden underneath the great 
pile of lavas of the Deccan trap."*" 

But it is safe not to count upon these probabilities. The 
situation, as visualized by the experts, calls for a serious thought. 
It is, therefore, necessary to economize and devise measures to 
make our limited resources of coal last as long as possible, 

32. Wastage : We find, on the other hand, that we are 
imprudently wasting our coal resources. Good quality coal, as it 
is very limited in quantity, should be used only for metallurgical 
purposes where inferior coal cannot be used. But as against this 
sane method, we find that good coal is being used for steam 
raising purposes by railways and others. This is something very 
serious and calls for immediate attention. In 1931-32, only 14 per 
cent was used for metallurgical purposes. The blast furnaces 
in India are, at present, designed for the use of unwashed good 
quality coal. 'This must be rectified, and plants modified so as to 
be able to use inferior coal. Cleaning of coal at present may be 
uneconomical ; but as our resources get depleted and the price of 
coal rises, it will become necessary and economical. 

1. Bulletins of Indian Industries and labour, No. 54, 1935* 

2. Vide Report, Vol. I, p 63. 

Records of Geological Survey pf India, Vol LXXV,Profes- 

sional paper 

4- Wadia, D.N., Geology of India, 1939, p, 339* 



GEOGRAPHICAL BACKGROUND 


15 


A lot of wastage also results from our methods of working 
the coal mines. Mechanical appliances for screening, cleaning 
and loading are used to a very small extent, and mechanization of 
tiie underground processes has riot made much progress. The 
Indian Coal Committee of 1937 remarked : The coal trade in 

India has been rather like a race in which profit has always come 
in first, with safety a poor second, sound methods * also ran ’ and 
national welfare ‘a dead horse ’ entered perhaps* but never likely 
to start.*’^ 

33, Conclusion ; It is thus necessary strictly to enforce 
measures like sand stowing for the conservation of our coal 
resources. It will be a great pity if we become destitute of coal 
while our iron ore resources are so vast. It may also^be, incident 
tally, mentioned that the internal organization of the coal 
industry is seriously defective, involving internecine economic 
warfare. What is needed is centralized control over prices and 
output. Only this will rid the industry of its frequently 
recurring troubles. 

During the World War 11, there was acute wagon shortage 
and the supplies of coal were seriously dislocated. The proximity 
of the coal area to the war zone also created some problems, e.g., 
the labour situation became critical. In 1941, the output of coal 
reached a record figure of 29*5 smaller tons but in 1942 it declined 
by 10 per cent. Demand for coal, however, was increasing on 
account of the rising tempo of industrial activity. 

34. Hydro-Electric Resources— Nature's Bounty : If nature 
has been ungenerous and niggardly in her gifts of coal to India, 
she has been almost lavish in her gifts of hydro-electric sources. 
This bounty of nature more than makes up for the deficiency 
of our coal, and what is more remarkable is the fact that vast 
possibilities of the development of hydro-electric power exist 
in areas with little or no coal and which are most distant from the 
coal mines. Nature thus seems to have marked out distinctly a 
‘‘ water zone ” and a “ coal zone so that no part of our country 
is handicapped in its race of industrialization. 

Apart from the fact that electricity is consideredt o be the 
only practical method of transmitting power and that power can 
be transmitted in this way to a distance "of 250 miles and, under 
favourable conditions, even 1,000 miles, ^ electricity is eminently 
suitable for India, for it can mitigate, to a very large extent, the 
rigours of the Indian climate. It can make the summer hot days 

1, Vide Report, Voi. I, p. 30. 

2. Journal of Indian Industries and Labour t VoL I, Pact II, May 1921, p* 15* 



16' ECONOMICS OF INDIA' ANlS PAKISTAN 

cool, and provide warmth in the cold season. If electricity 
is provided in factories on a generous scale, the factory hands 
will -find the factories more comfortable than the homes. It will 
immensely improve .their efficiency. 

35. Estimate of Hydro-Electric Resources : The rainfall in 
India is seasonal and the whole of our year’s supply of rain is 
given to us in a few weeks. There is, conseQuently, a tremendous 
waste of water ; it simply runs down. This water can be stored 
and utilized for the production of electrical energy. Indian 
rivers are full of natural waterfalls ; even canals and water storage, 
as in Deccan, are suitable for generating energy. “ The rainfall or 
snowfall over India could provide potential energy equivalent to 
some thousand million kilowats.^ The Hydro-Electric Survey of 
India estimated the water-power resources available in India to be 

5.582.000 k.w. or 7,400,000 h.p.^ 

36. Hydro-Electric Works: Several big hydro-electric 
schemes are already in operation in India. In fact, India is one of 
the pioneers in this respect, as the first hydro-electric scheme 
undertaken to the East of Suez was that on the river Cauvery^ in 
Mysore State, and for some time it was the largest transmission 
line in the world. 

The Tata’s three undertakings, viz,^ Lonavala, Andhra Valley 
and NilaMula, have a combined capacity of 245,600 h.p. These 
three units, operating as one, supply energy to Bombay and its 
surroundings at 0*45 of an anna per unit for industrial purposes. 
Bombay Cotton Mills and other factories consume about 150,000 
h.p. 

The Mysore Hydro-Electric Works have a total capacity of 

46.000 h.p. and a power station at Shamsha falls is expected 
to produce 32,000 h.p. and another at jog falls 20,000 h.p., thus 
making a total capacity of 89,000 h.p. 

The Pykara Hydro-Electric Works (Madras) can, with full 
storage, generate 90,000 h.p., in addition to 30,000 h.p. from 
the tail water at a lower site. The most remarkable feature of 
the works is that it has the highest head plant in the British 
Empire, the vertical drop of water being no less than 4,000 feet. 
Of the total power demanded on the plant which amounted to 

13.000 k.w. in 1936-37, the textile mills alone accounted for 56 
per cent, other industrial establishments taking 15 per cent. The 
current is supplied at the rate of 0*40 to 0*80 an anna per unit. 


1. Shiv Narain, Hydro-Electric Installations in India, 1922, p. 2. 

2. H^iciro-Ekctric Survey of India, Triennial Reports, 1922, p. 55* 



GEOGRAPHICAL BACKGROUND 


17 


The Mandi Scheme in the Punjab, when complete, will give 
a total output of 118,000 k.w., a quantity more than sufficient to 
meet the requirements of the present generation in an area 
extending from Delhi to Sialkot and Lyallpur. Its 15,000 feet 
long tunnel is a marvellous achievement and is one of the 
first steel mantled tunnels to be built in Asia. The charges 
for electricity in Mandi Scheme for industrial purposes vary from 
9 pies to 18 pies per unit. 

Some schemes are also operating in the U.P. and Kashmir. 
The Kashmir works can generate 26,000 h.p. In U.P., a scheme 
investigated on the Jumna river contemplates the development of 
minimum continuous power of nearly 125,000 k.w. in four stages. 
It is estimated that with a 50 per cent load factor the cost 
per unit delivered within 100 miles of the generating stations will 
be r5 pies per unit. Mr. Mears estimated that a minimum 
continuous power of 24,000 k.w. could be generated on the Sutlej 
within some 40 miles of the Jumna generating stations. It is 
estimated that both these rivers can ensure the generation of an 
average block of power amounting to half a million kilowatts for 
consumption between Ludhiana and Aligarh.^ 

37* Conclusion : Thus it may be seen that hydro-electric 
schemes in India are both big and unique. The rates charged are 
fairly low and the energy is being readily taken up. Financially 
also they have been quite successful ; perhaps, the solitary excep- 
tion is the Mandi Scheme. The Pykara Project in Madras, 
though not designed for profit originally, yielded a net surplus, in 
the third year of its working, larger than was anticipated in the 
tenth year. Development of hydro-electric energy occupies an 
important place in the schemes of Post-war Reconstruction in 
India. The irrigation Adviser to the Government of India, 
Sir William Stampe, has proposed a scheme to which he has 
given the name “Electrical Federation of India.” We have so 
far developed our hydro-electric resources to an insignificant 
extent. When we develop these resources to a reasonable extent 
a very great source of power will be placed at the disposal of our 
industries. Agriculture and small-scale industries will be specially 
benefited. 

38* Animal Resources: India has a cattle population to 
match its human population. She carries one-fourth of the 
world’s stock of cattle and two-thirds of its buffaloes and has to 
support something like 97 million sheep and goats. The number 

1. Presidential Address by K.B. Abdul Aziz at the annual general meec- 
ingof the Institute of Engineers (India) held at Lahore m January 1940. 



18 ECONOMICS OF INDIA AND PAKISTAN 

Vv 

of cattle per 100 acres of sown area varies from 49 in N -W.F.P. to 
163 in Ajmer-Merwara ; and per 100 of population, it varies from 
24 in Delhi to 863 in Ajrper-Merwara? The annual cash value of 
livestock and products has been estimated at Rs, 2,000 crores? 

Such a huge livestock can undoubtedly be of great value to 
the nation and can enable us to lay the foundations of flourish- 
ing leather and dairy industries, besides several others based on 
by-products like hair and bones. 

3?, Huge Livestock-»-a Liability rather than an Asset : But 

such a huge, livekock, far from being a national asset, is a big 
national liability and a cause of loss and botheration. The quality 
of Indian cattle is very poor. They are generally mere skeletons 
and so many bags of bones. ’If we improve the quality of out 
oxen and make a pair to cultivate 15 acres instead of 10 acres, we 
shall need 17,800,000 pairs to cultivate 267 million acres, ‘the area 
sown in 1936-37, we shall be able to release 8,900,000 pairs ; and 
if the cost of maintenance per. pair is computed at Rs. 150 a year, 
it alone will mean a saving of Rs; 1,33,50,00,000 to the farmers. 
Similarly, by systematic breeding and proper feeding of the milch 
cattle, the wealth of India can be increased by several crores of 
rupees by increasing the yield of milk. , According to the last 
cattle census, there were in India about 52 million cows and 21 
million female buffaloes. The lactational yield per capita, as shown 
by Provincial Marketing Surveys (1936), was 5tt7 lbs. for cows and 
990 lbs. for '‘bu€aIoes.' In the breeding tracts, however, the 
lactation yield was 943 lbs. for cows and 2,160 lbs. for buffaloes.^ 
This me^ns that owing to lack of proper breeding, the Indiap cow 
yields 456 lbs. less in a lactation and, a buffalo 1,170 lbs. less than 
they could. Assuming the number of properly bred cows and 
buffaloes to be negligible and taking two annas as the average 
price of milk (the pre-war rate), the loss to India per lactation may. 
be put at Rs. 60,34,50^000. These little calculations show what 
immense possibilities we have of adding to our wealth, by adopt- 
ing scientific methods in the utilization of our natural resources. 

India produces a large variety of cropS'which, besides feeding 
the people, supply valuable raw materials for Indian industries. 
India can be justly proud of its fauna and flora. 

40. A poor people in a rich country : This rapid survey of 
our resources is enough to show that. Nature has been very 
generous to u|,, almost lavish in- some respects. Her biggest 
gilt, the Himalayas, are of inca lculable economic benefit to us 

1. Indian Information Series, April 1, 1939, p. 149. 

2. Agricultural Stati4tks of India, 1937^38* VoL I, p. v. 

3. See Bulletin No. 22, 1939, of the Imperial Agricultural Research. 



GEOGRAPHICAL BACKGROUND 


19 


an<l have immense potentialities. The Indo-Cjangetic plain is 
a perennial source of rich and varied crop^. The infinite variety of 
climate can enable us to develop a varied economic life. Our 
mineral resources are fairly varied and suiEciently rich. Coal may 
be deficient ; but water power resources are immense. We have a 
huge livestock and a vast human population. Geographically, we 
are ideally situated. India seems to be thus marked out to be one 
of the biggest and the most important countries in the world. 

But what is the actual position I Poverty stalks the land, a 
poverty for which there is no parallel in the world. It is nothing 
short of an enigma or a paradox that we should be poor while our 
country is meant to be so rich. 

41. Criminal waste of resources : It is not proposed to 
discuss here in detail the problem of poverty. But we can make 
some general ' observations here in order to understand this 
mystery of poverty in the midst of plenty. 

One thing that strikes us is the criminal waste of our re- 
sources. We have already seen how our coal resources are being 
wasted for the sake of getting maximum profits. Dr. ^ R.K. Das, 
in his book, Industrial Efficiency of India, has made a detailed study 
of the wastage of our resources. According to his calculations, of 
the potential arable area only about 30 per cent is being utilized 
for productive purposes and 70 per cent wasted. Taking the most 
liberal view, not more than 25 per cent of our forest resources 
are utilized and 75 per cent wasted. The wastage of fisheries has 
been put at two- thirds a year. Production of iron ore is only a 
little more than 11 per cent of what it should hay e been. 
Wastage of water resources amounts to 99 per cent. He concludes 
that the wastage of natural resources of India amounts to /5 
per cent. 

Then, there is also a wastage of human resources on account 
of ill-health, ignorance, unemployment or under-employment, 
useless motherhood and premature deaths. Out of the total man- 
power of 178 million persons (based on 1921 census) consisting or 
92 million men and 86 million women, India loses annually the 
labour or energy resources equivalent to 45 9 millions through 
under-employment, 32*9 millions through ill-health, 2 5 millions 
through useless motherhood. In other words, the energy r^ources 
of 114 million persons, Le., 64 per cent of the total man-p^ower is 
annually lost. 

Wastage of capital arises from an unproductive investment, 
from immobilization of the capital resources and f tohi 
utilization of the existing capital resources. inis has .oeen 
estimated at 66 per cent of our total canital resnnrres 



20 


ECONOMICS OF INDIA AND PAKISTAN 


The total wastage of the productive factors, viz^^ land, labour 
and capital, has been put at 69 per cent^ which is more than two- 
thirds* We are, in other words, utilizing less than one^third of 
our productive power* Is there any wonder that we are poor 1 

42* Causes of Wastage : Causes responsible for this wastage 
are numerous and complex. They lie in our social, economic and 
political structure. Racial characteristics, ignorance, inexperience 
and illiteracy all have something to do with this state of affairs. 

The absence of economic Swaraj has prevented the formula- 
tion of policies calculated to the exploitation of our resources 
always on the right lines and to the full extent. The policy of 
inactivism or laissez-faire ^ pursued by the State in India, has 
considerably affected the development of our resources. 

The adverse influence of social conditions is only too apparent. 
The caste system is responsible for the vivisection of the Indian 
society and by preventing free mobility of labour, fits many 
round pegs in square holes. The joint family system kills indivi- 
dual initiative and enterprise and breeds drones, which state of 
affairs, in its turn, reduces the chances of accumulation of capital 
The stay-at-home habits, engendered and encouraged by the 
system, are responsible for the maladjustment of supply of 
labour to the demand for it. 

The dominance of religion makes the people fatalists, super- 
stitious and conservative and cuts across the organization of the 
economic interests. Religious sentiment also prohibits, in the 
majority of cases, the full economic utilization of our animal 
resources. 


1. Das, R.K., Tie Industrial Efficiency of Ifidia, 



CHAPTER II 
POPULATION 

1, Importance of the Study of Population : In spite of the 
preoccupations of World War II, India has had a census in 1941. 
The financial considerations did not allow the operations to go 
their full course or the tables to be completed, still the very 
undertaking of the task at such a time shows how very important 
it is. It is only recently that scientific study of demography has 
been undertaken and yet its importance is recognized on all hands. 
The relation between progress and population is so intimate that 
without a proper survey of the different aspects of population in 
a country, no future advance can be planned. India is poor and 
her poverty has no parallel in the world. The per capita income 
is meagre. The standard of living is almost the lowest in the 
world. Curiously enough, this extreme poverty exists in the 
midst of great plenty. To remedy this situation a thorough and 
scientific study of Indian economic life is essential. But no active 
remedies can be suggested without a study of the Indian people 
themselves, their numbers, age groups, occupations, diseases, ratio 
between the two sexes, etc. Herein lies the importance of the 
study of the population problems of the country. 

2. Population and its growth : The total population of 
India, according to the 1941 Census, is 388,997,955 souls, of these 
93,189,233 live in Indian states and 295,804,722 in British pro- 
vinces. The total area of India (excluding Burma) is 8,581,410 
square miles. 

During the last 50 years, the population of India has grown by 
no millions as is clear from the table below : — 

TABLE I 

POPULATION IN INDIA (MILLIONS) 

per cent increase 

1891 1931 1941 since i89i 

Total persons 279 338 389 39 

British Provinces 213 257 296 39 

Indian States 66 81 93 40 

TABLE II 

Percentage variations from decade to decade were as follows : — 

189M90I 1901-1911 1911-1921 1921-1931 1931-1941 

4-1*5 4-6*7 4-0-9 4-10*6 4*15 

It Will be seen that the growth of population from decade to 
decade has been slow and irregular; the governing factors have 
been famine or epidemics. Their prevalence has been a restrain- 
ing influence and their absence responsible for a substantial 



22 


ECONOMICS OF INDIA AND PAKISTAN 


increase. Between 1891 and 1901 the twin factors of plague and 
famine checked a rapid gtowth in numbers. The decade 1901- 
1911 experienced a fair degree of agricultural prosperity and thus 
registered a higher increase. The prospects of increase in the next 
decade (1911-1921) were marred by influenza which raged in an 
epidemic form. But for this calamity which is estimated to have 
taken a toll of 14 million persons, population in India would have 
considerably increased. It seems the increase in numbers during 
the first seven years of this decade was neutralized by this disease 
during the closing years. Since 1921, however, the population 
has increased at a very rapid rate. Nature seems to have been 
less unkind ; perhaps the methods of conquering epidemics have 
been perfected. Better increase in irrigation facilities have mitigat- 
ed famine conditions. A part of the may be attributed to increase 
in the area of census operations and improvement in the census 
methods. Even making an allowance for these factors the real 
increase in population seems to be fairly alarming. Although the 
census commissioner considered 7 to 8 per cent for the decade as 
the rate of probable increase, to us, however,, 10 per cent seems to 
be the normal rate of decennial increase. Considering the huge 
size of our population, this rate is sufficiently perturbing. 

The increase has not been uniform in all parts of India, 
although higher rates are universal as the map below shoves : — 


1931. 


Percentage varidtion of population in 1941 as compared with 



Increase less than 10% 
Increase between 10 and 18% 
Increase over 18% 

Total average increase for 
India 16% 



POPULATION 23 

and iiavr/CeMremfSto »“* 

and t„ the east.^TfL"^^ have ?n X'Sh”"* 

Srow^foTn'ri';:&STefe^ »Pi<I 

increase'inporulafiot marbe suTmSf^k 

apead. The\n,e° w£'”“e fortune „(‘X'uI'a' L'dT“J' ■ 

W ien the human tide first flowed in from Eurone TI 

haiT'en"tSp\S!bTfc“,“ ®“=‘' ''*™“ 

has fared similarlv Tn 'Wo^^r increase. Bahawalpur 

rural capacity the numbers haye''muSpjiedSpid'ly“*‘“'‘^ asricul- 

tor leaving many persons unreeistere^rl Th^ 

sreates, in North India Alf Sfdack h.1 fen fanS 
hence the greater increase in density in North India. 

(c) In 1941, the country as a whole was censni rr^r^a^i , 
no one waiitred to be missed in the count irSt S h^l^^^ 

t^sTa fe communal enthusiasm vitfed efemfe,” 

tion and exaggerated figures were supplied in certain nrKc^ ™ 

The house lists were used for compamive c„™bfe«S„"Sd 
sound enough taults were obtained " in spite of the difficult^ 

4. A study in Density of Population; The number of 
square mile varies from province to province and from 
state to state (see appendix). We find such • extreme variations S 

:S«ncW™i stfefetfeofe'““' 

Density is governed, in the first place, by climate. A healthv 
will attract more people and maintain the existing popj 

U°hy itll bfelry W.“ *° "“fo^hKl-k as i, in Assam, the 


1. CensMs of India Report, 1941, Vol. I, p. 23. 



24 ECONOMICS OF INDIA AND PAKISTAN 

Secondly, the density of population depends on rainfall 
If rain is adequate, timely and evenly distributed, it will be high-- 
ly conducive to the growth of numbers. But rainfall ^ not 
the only determining factor. In the Himalayan areas like Dehra 
Dun, Almora, and Simla, the rainfall varies between 60 and 87 
inches in the year, yet the numbers per square mile are very few. 
Similarly in Assam where the rainfall is plentiful, the density is 
only 186. The same is true of Kashmir which has a density of 
only 49 . The fact is that no single factor can explain the 
variations in density. It is only a happy combination of several 
factors which accounts for higher density. 

Thirdly, the irrigation facilities, which stabilize agricultural 
conditions, lead to denser population. The canal colonies in the 
Punjab are much more densely populated than some of the other 
districts. 

Fourthly, economic development leads to dense population 
and the absence of it accounts for sparse population. It is 
admitted that the number of people that can be maintained in the 
pastoral stage must needs be very small. In the agricultural stage 
larger numbers can be supported. But in the industrial stage 
there is room for many more people. It is well-known that 
all centres of trade and industry happen to be mostly densely 
populated. The higher density in Bengal is partly due to this 
factor and a comparatively lower density in the Punjab is due to 
the agricultural character of the province. 

Fifthly, the nature of the soil also makes a difference. 
Regions of sandy soil show a lower density as compared with 
those with fertile soils. Rajputana for instance is very sparsely 
populated. 

Sixthly, perhaps the most important single factor having 
a bearing on density is the configuration of the area. It is the 
shape of the surface of the earth which largely explains variations 
in density. The hilly and the mountainous tracts in the north- 
east or north-west are less densely populated than the level 
plains of the Punjab, U.P, and East Bengal The level tracts 
afford greater facility for the exercise of economic activities 
and yield a larger fruit. India is mainly, an agricultural country 
and density varies with agricultural conditions too. 

Seventhly, security of life and property is also a factor respon- 
sible for the number , of people living in an area. In the tribal 
areas and in certain tracts bordering on jungles, the density 
is comparatively low. 



POPULATION 


25 


Finally, inter^provincial or inter-state variations in density 
are also due to the stay-at-home habits of the people. People 
cling to their native land even though the prospects of living 
may be brighter in a remote province. 

5* Density in India Compared with Foreign Countries j If 

we compare the density of population in India with some other 
countries, there is apparently no cause for alarm as is shown by 
this table. 


TABLE III 

DENSITY PER SQUARE MILE IN SOME COUNTRIES 


U.K. 

... 685 . 


Belgium 

654 


Germany ••• 

... 352 !- 

lyjL 

Japan 

... 443 i 


British India ... 

341 j 

1941 

But the inference is wrong, 

as these are 

industrial countries 


and can easily maintain heavy numbers. When, however, we 
compare India with countries with an agricultural economy, 
we feel concerned at the seriousness of the problem. 

TABLE III (continued) 

Density Year* 


France ... 

... 184 

U.S.A. 

41 

New Zealand ... 

12 

Egypt 

... 34 

India 

... 246 


With such a dense population the pressure on the soil has 
greatly increased. The agricultural resources of the country have 
not expanded in proportion. Between 1901 and 1941, the popula- 
tion increased by 32 per cent while the cultivated area increased 
by 13 per cent only*- and the area under food crops during the 
same 40 years increased by 5*3 per cent only. During the war of 
1939-1945, when India was cut off from Burma and Australia, 
India had to face a dearth of food to such a great extent that 
famine conditions prevailed in deficit areas like Bengal. 

6. Is there any connection between density and the level 
of prosperity in a country ? From table III it would appear that 
so far as density is concerned we are in the company of rich and 
prosperous countries like U.K., Belgium, Germany and Japan. 
Like them we show a very high density of population per square 
mile. To a superficial observer there might seen some essential 

1. Gyan Chand, Indians Teeming Millions, Chapter YUL 



26 


ECONOMICS OF INDIA AND PAKISTAN 


connectiop between high' density and prosperity. It may be 
argued that if a country contains a large number of intelligent, 
industrious and resourceful people, they will certainly develop 
and work the resources of the country to its best advantage and 
contribute to its material prosperity. The argument seems 
plausible. But it is fallacious. If a country is densely populated 
it does not necessarily follow that it must be prosperous. The 
same density does not indicate the same level of economic pros- 
perity. "rhe United States, admittedly the richest country in the 
world, has got a very low density of 41 persons per square mile, 
and though the New Zealanders are fairly rich, yet the density 
there is as low as 12. Then again, U.K., with the highest density 
and U.S.A. with low density enjoy nearly the same standard 
of prosperity. The fact, is that there is no necessary connection 
between density and prosperity. Of the agricultural countries we 
have the highest density (table III). But far from indicating a 
larger measure' of prosperity and being a matter for congratula- 
tions; it is a cause for alarm. • 

7. The iProblem of Urbanization: The following table 
shows percentage of increase in ouf 'urban population. 

table IV 

pfeRfcENTAGE OF PEOPLE LIVING IN URBAN AREAS 
1921 1931 1941 

10-2 11 12 -? 

It is, quite clear tha^ftbouf 90 per cent of Indians still li'vc in 
villages. The conditioiis iir the 'West are quite the oppdsitfe'. In 
the western countries the' percentage of urban population Varies 
from -nearly 50 pCr -cent in France to 80 per cent in England and 
Wales.' ^ > 

•The distribution of populatipri between', rural and urban areas 
is highly significant. Economic progress, in every country has 
.been .marked by a corresponding increase in the Urban population. 
■Xhe fasct .that very small proportion of ouf people' live in urban 
areas is an index, of our economic backwardness. It sho#s 
unmistakaf)ly that in the development 6f trade, transport and 
industry we are yet far behind the other ‘civilized countries. It 
brings home to us our almost exclusive 'dependence on agriculture 
and indicates an unbalanced economy; i.. , ,, , , 

, I, The rural'urban ‘distributibri or tbe isigbifitrant 

froxa an.qther .point of View. It, throws K^ht on a ;people’s 
national character! It is well-known that p&'sons living in the 
villages are let htirgiCi^ 'GQia^rYative, aupe^stitiptxs a^nd impervious to 
new ideas. The villages represent the back-waters of civilisJation 



'^POPULiVWJa 27 

and’ reSgiopSi of intellectual stagnation. This cliaracter . of ^ the 
people acts as a drag on economic progress. Oh tfle contrary, the 
inhabitants of the cities are. characterized by '^'alertness, industry 
and resourcefulness. It is from the cities that all progn^ssive 
ideas radiate and civilization infilterates into the “ villages. ' The 
fact than we* have only a few cities . shows that the springs of 
economic progress are exceedingly weak. Our huge rural popula- 
tion stands in the way of all enlightenment and progress. A 
country is what its people make it. For the economic progress of 
the country a toning up of the national character is, therefore^ 
very essential. - . - ■ -- 

These- considerations, calhfor a more balanced distribution of 
our population between rural and urban areas. ' Not only is the 
propottion of our'ur'ban population* insighificant, but ^prpgress in 
this, direction has been very slpw indeed* From 10*2 in 1921 we 
have tardily advanced to 12‘"8 per cent iti 194'!-/ We have been 
almost'stationary in this respect. 

But although the percentage increase, h^s been very slight, yet 
the absolute growth in urbanization is very substantial. No 
doubt thb number of big Cities inlndia is v^ry^ small there are 
only sev^n cities with'i over' 5OOJO0O persons and only 57 with 
ovet . 100,000. But between 1921 ‘and 1941 the number of cities 
with 5(3,000-100,000 persons'hai^’gone up from 65 to 95, that of 
cities ' with 10,(300-20,000 iias - risen fern 543 to 733 and, the 
number of localities with 5,000 to 10,000 has incre^ed from 9{87 
to 3,017. Ix)oked at from this point ,pf view the speed of urbani- 
zation seems to be quite fast. Urban population has had an 
increase of 81 per cent against 15 per cent for the whole of the 
country. The following are the main causes. of this development. 

' (a) Industrialization is increasing apace with greater aggre- 
gation of numbers iti'the cities. To maintain healthy surroundings 
and check the insidious inroads of infection and disease, it is 
most essential that the locM authority, should strictly rpgulate 
further building activities and frame comprehensive plans in time 
for the spreading towns. Uncontrolled urbanization would bring 
untold misery and' suffering, the effects of Which would be 
impossible to eradicate. • 
i (b) City life has great charm for middle ckss people. Electric 
light, running water, tram and bus, all play their part. Educational 
facilities for boys and girls are another attraction. The library, 
the'theatre and the cinema-house have an appeal of^ their own to 
'the^ leisured classes. In fac^, the comforts and amenities of life in 
big cities are rapidly inflatii^. their numbers. 



28 


ECONOMICS OF INDIA AND PAKISTAN 


(c) The anti-moneylending legislation in the Punjab has 
played its part in denuding the countryside of many educated 
people who have flocked to the town and the city in search of 
better business. 

The Bombay province has the largest percentage of people 
living in towns while Assam has the smallest, with 26 and 2*8 per 
cent, respectively. Appendix II shows the number of towns in 
different parts of India. 

It will be noted with interest that in 1941 — 

94*2 millions of people lived in villages with less than 500 inhabitants 

86*96 millions of people lived in villages with 500 to 1,030 inhabitants 

57*4 millions of people lived in villages with 1,000 to 2,000 inhabitants 

63*4 millions of people lived in villages with 2,000 to 5,000 inhabitants 

301*96 millions lived in the rural areas^ 

The U.P. has the largest number of cities with ,the Punjab 
mnning a good second. Bengal has only four^ cities including 
Calcutta. It is not suited for big cities. The Bengali is not fond 
of factory. In areas where cheap hydro-electric power is available, 
as in ^est U.P. and the East Punjab, greater dispersion is as 
much possible as desirable. 

8. Urbanization Not An Unmixed Blessing : There is an-* 
other side to this picture. 

India is a tropical country. Urbanization to the extent that 
l^^^sent in the West is not compatible with her climate. With 
a bare 12 8 per cent people living In the towns, the congestion in 
some of the big cities is terrible. Tuberculosis and venereal 
diseases are rampant, while epidemics take a heavier toll than in 
the open countryside. 

Undoubtedly, as Mr. Yeats, the Chief Census Commissioner, 
remarks, this urbanization has all the drawbacks of lack of 
control and pneral squalor.’" Approaches to every big city are 
mdeous. Thousands of homeless squatters are found camping in 
the outskirts.^ Brick-kilns are another hicous sight. Lahore 
irom the air is a spreading sore,” Delhi with its /‘ribbon 
ueyelopment^^ along roads going out of the city is even worse, 
^alcutta is as an octopus with more than eight tentacles/" 
Amritsar presents an ugly, repulsive look. 



POPULATION 


29 


The slums in big cities like Bombay, Calcutta and Lahore 
which shelter large numbers of labourers are a clear proof of the 
lack of foresight on the part of the governing bodies* The 
‘"tenements” constructed in some of them are an effort to 
improve factory labourers’ residential conditions, but they are 
neither sufficient nor comfortable. This “ slummery ” is destruc- 
tive of both moral and physical health of the labourer. 

We do not advocate, therefore, in India piling up of the 
people in big cities, blindly following the West. We are anxious 
not to repeat the mistakes of the West. We should have a 
scientifically planned development of our cities so that all the 
evils associated with congested areas are prevented from appearing 
in India. We should have medium-sized, open, airy and healthy 
towns. What is needed in India is to urbanize the rural and 
ruralize the urban centres. 

9, Distribution According to Occupations : A study of the 
following table of the vocational distribution of our people 
will give an idea as to the relative importance of the various 
means by which our people draw their sustenance. 

TABLE V * 


General occupations 



Total 




Percentage 

percentage 

A. 

Production of raw 

i Animals and 

65-60 I 

65*84 


materials 

vegetation 



ii Minerals 

0-24 ) 


B. 

Preparation and 

i Industry 

10*38 j 

■ 17-56 


supply of material 

ii Transport 

1*65 3 


substances 

iii Trade 

5*83 j 

1 

C. 

Public Administra- 
tion and Liberal 


2*86 } 

2*86 


Arts 

i Persons living on their 

) 

*16 

1 



own income 


D. 

Miscellaneous 

ii Domestic service 

7*51 

1 

r 13-74 



iii Insufficiently described 

5*03 ■ 



w Unproductive 

1*04 , 

1 


Some of the salient features of this distribution are that 65 6 
per cent depend on agriculture, 10*38 per cent on industry, 5 8 
per cent on Trade and 2*86 per cent are engaged in public adminis- 
tration and what are called liberal professions. 

Even a casual observer will be struck by the most uneven 
distribution of our people over the various occupations. It simply 
reflects the lopsided nature of our economy resources, If^ the 
economic development of the country had taken place in a 
sufficiently deversified manner our human resources would have 
shown a more balanced allocation. 



30 


ECONOMICS OF iNblA AND PAKLSTAN 


Only 2*86' per cent of our people are engaged in administra- 
tion .and liberal arts. This shows a high degree of illiteracy and 
intellectual backwardness. A serious effort is needed to strengthen 
the drive for increasing literacy in the country. The civil 
administration, police and tHe arrny absorb only a little over 1 per 
cent of bur population. ' Even if this proportion is doubled 
administration will not solve the problem of middle class un- 
employment. In the absence of alternative sources pf employ- 
ment; however, it is- understandable why people fight hard for 
these limited jobs. 

Although , 10 38 per cent ar^ shown as being engaged in 
industry, only V5 per cent are accounted for by organised industry. 
WUien we know that less than one-fifth of our people are,, engaged 
in trade, transport and industry, wie find a clue to Indian, poverty. 
These are the most paying professioris, and when the bulk of our 
people drift into unremuherativ^e’channels, poverty is inescapable. 
industrialize or perish should be our slogan. No amount of agri- 
cultural rehabilitation can pull us out of the mire of poverty. 

The most distressing fact about,. our vocational distribution is 
that the overwhelmingly large numHer of the people are dependent 
on^agriculture. Even Bengal, Bihar and Orissa, in spite of having 
developed certain industries, are predominantly agricultural and 
so are the Pun|ab and U,P. although a very large prqporliioh of 
their populaftioh is returned as individual labour. India shows the 
highest percentage of people in thei. world as ' depending on 
agriculture. 

Agriculture is admittedly the least remunerative pf occupa- 
tions. Experience all over the world has shown that economic 
progress has always been marked by a diminution in the nufnbers 
engaged in agriculture and by . an increase in those engaged in 
trade transport and industry.^ In England; less than 10 per cept of 
the people depend on agriculture. Indian agriculture is a gamble 
in the rairis and, therefore, always, uncertain of success. It is 
subject j to the law of diminishing retnrns. It is a seasonal occupa- 
tion. and subjects our .people to enforce idleness for several 
ntonths in the year. Exclusive dependence on ag|?icultut:e is an 
index of unbalanced economy and is one of the most important 
caiises of ppvqrty. This situation needs irnmediate rectification. 
As long ago as 1880; the Famine Commission issued a warning 
about the . dangers of this situation. 

ilt'maybe noticed tfiat frompepsus to census the vocational 
distribution: has 'Remained practically the same. There has been 
no fundamental change in this cespeptiduring theTast 25 .years pr 



lOPULlA^TlON 


31 


SO* A slight ificrease is ’observable' in the ’num)be,t. 'of., persons 
engaged in transport’ which is due to the idevelopment of' motor 
tra^c and also in those engaged in liberal professions whicl;i £nay 
be attributed to advance in literacy* It is time that we bestir 
ourselves and tfiake eofiscious and vigorous'-efforts to bring about 
a more ‘even distribution of the people, rQver the various occupa- 
tions arid overcome this economic stagnation. 

10. 1 Distribution According io Community -: Up to 1931 
religioi^is returns, were used as communal op^s. Jn 1941 a depatture 
was made from the old metl^od of inqtiir‘5|;l ''(SaS''te-sortirig on an 
all-India sca!le was dropped.' The Cerlsus Re^yoft fo'r 194l •says : 
“ The religious returns of previous censuses so far as they relate 
to the tribes are wprthless.”^'" No one can estplain the mefeliing of 
the word * religion, to ari' ordinary member of a tribe* /, The 
eniimerator in the past put ddwn anybody as Hindu if he was not 
Christian or Muslim. Even an anthropologist could not determine 
how far a tribesman was kssimilated in Hindnism* Hence, in 1941, 
a more scientific basis for cbmmunify erltimeration was.'adppted. 
The comparative communal figures- for diffefent''censuises^are given 
below*:— 

TAbtfe VI2 

PERCjgNTAGE OF DIFiFERENT COMlvlUNlTlESTHTNDiA’ 

Year, Hiudus i Muslims'' Chrisfians Jains $ikhs Tribes Others 
1931 68*2 22*1 ' 1*8 *4 1:2* 2*4’ ^*9' 

1941 6§*9 ;23*8 1*^ •4 && 0*2 

Thus one cohld say that out of every lOQ peT^on^iiRuIp^^^* 
are Hindus, 24 Mrisliraa,' tribesmen, and out Tpf tne direst half 
Sikhs arid half 'Christians.- ^The ^Hindus are in, the^^jprity in the 
Sriuth and ceritre-of India, while the Muslinif are'predom'inant in 
N*-'WlF.P., Kashmir, Baluchistan, Sind, Punjab ,and Bengal. , The 
Sikhs ate confined to the Punjab with just, a scattering in the pther 
provinces* The-^ tribesmen are mostly founian Assam,, Bihar apd 
Orissa* The Christian^ element is stronger in Madras than else- 
whete. 

The 1941 Census figures show that the Muslim, component in 
Bengal is unchanged while in the Tun jab and Mysore it has 
increased by 4 per cent. Assam shows an increase due to. migra- 
tiori of ’Muslims from East Bengal* Sind and Ajmer-Merwara 
show a j^-ecUne of 2 per cent and Kashmir of about 1 per cent. 
The rppst noticeable rise is in Assam where the Muslims have 
in creased* by 5’5 per c^nt* 

1. Yeats, Op. Cit., p. 28. 

2. Adapted from= 194i ‘Census,^ Vdl^ d , p* ‘ 104^ 



32 


ECONOMICS OF INDIA AND PAKISTAN 


The Assam and Bihar figures are interesting as they show a 
great fall in the Hindu clement due to lakhs of people previously 
described as Hindus now enumerated as tribesmen. 

TABLE VIP 

NUMBERS PER 10,000 OF THE POPULATION 


Province 

Hindus 

Muslims 

Tribes 


1931 1941 

1931 1941 

1931 1941 

Assam 

5720 4129 

3196 3378 

872 1747 

Bihar 

... 6231 7296 

1132 1298 

544 1391 


The Hindus also show a small decrease in Bengal, Madras ai^d 
li.R due to tribesmen being excluded from Hinduism, Sind shows 
an increase of 1 per cent. 

11. Sex Ratio : It is a known fact that at birth the number 
of male children is greater than the females. In foreign countries 
more males die off, thus leaving an excess of female children to 
grow up into women. In India too the number of males born is 
greater than the females. Organically the female sex is the 
stronger. Recently the League of Nations published a very in^ 
formative data on the expectation of life in thirty important 
countries.^ The table shows that at all ages, the expectation of 
life of women is greater than for man in all countries except in India 
up to the age of forty, where mortality among women during the 
child-bearing age is particularly high. In India up to the age of 
12 the mortality of female children is less than that of male 
children. It is after the age of 12 and up to the age of 45, the 
child-bearing age, that huge numbers of women are cut off, thus 
reducing the ratio of females to males in India and creating a 
problem exactly the reverse of that in the West,^ Early marriage, 
making an easy transit from the nuptial bed to the funeral pile, 
purdah and the lack of trained midwives are equally conducive 
to the greater mortality of women. Pernicious anaemia, con- 
sumption and uterine diseases, too, take their heavy toll. Extreme 
poverty does not permit women to have sufficient rest before or 
after delivery, thus hastening them into the grave. . 

The progressive decline in the proportion of females to 
males from decade to decade is a cause for great alarm, 

TABLE VIII 

• NUMBER OF FEMALES .IN -INDIA TO EVERY 1.000 MALES 
Yeai Number of Females 

1911 ... , ... 954 

1921 ... ... 946 

1931 ... ... 940 

___194J . .. _ 935 

L Census Report^ 1941* pp. 102-104* 

2. Ieagt4£ of Nations* Monthly Buiypin^ December 1944. 

^ PJC.' f^ooulation ProWem of Indio. 



POPULATION 


33 


1941 

1,009 

1,069 


Woman is held cheap in India and her health and diet delibe. 
ratelv neslected even in upper class families* This deliberate 

neglect may be styled “ indirect infanticide.” 

Among the major provinces, the Punjab has the le^t number 
of females— only 847 per 1,000 males. Madras- and Orissa ar^ 
the only two provinces with more females than males, but -tue, 
ratio of females in these also has fallen in 1941 as compared with 
1931. 

FEMALES PER 1,000 MALES 

1931 

Madras - - - 

Maternal mortality is the most important cause of fewer 
females in India. Three specific inquiries were conducted by 
medical men in Madras, Calcutta and Bombay recently which 
yielded figures of Ifi-fi. Zd'd and 8-9 deaths per 1,000 child-births. 
The range is rather too wide. Sir John Megaw s village inquiry 
of 1933 gave a maternal mortality figure of 24 5. The Public Health 
Commissioner for India makes tentative suggestion of 20 deam 
per 1,000 births for India. The latest figures for England and 
Wales is 2‘9.^ The great difference between the two figures 
shows the gravity of conditions in India and the great leeway to 
be made up. 

12 Expectation of Life ; A child born in I^is expects to 
live a much shorter life than in other countries. Elsewhere the 
average span of life has greatly improved, while in India, the 

improvement has been next to nothing. ^ ..c- tjVo o-ir 

Experts have produced comparative^gures of the life ex- 
pectation in ’several countries. They are : 

TABLE IX 

EXPECTATION OF LIFE 

New Zealand 
Britain 

Japan **• ^ - 

A steady increase in the longevity of life in England from 
4413 in 1891 to 55‘62 in 1931 and 62 in 1939 .reflects a rise in the 
s^did of Uving 

collected bv the League of Nations show that in all the important 

oo“ S .hi world there Is greater ‘'"‘f’S's »'»hlrt to iX 

than in India*^ That the expectation of life is so short in inaia 


67 < 1934-38) 
62 (1937) 

48 (1935-36) 


U.S-A. 

U.S*S R. (Europe) 
British India 


65(1940-41) 
44 (1926-27) 
27 (1931) 


L 

2 * 


Yeates. Cens«s Report, 1941, VoL I. p. 24. 
League of Nations’ Monthly Bulletm, December 



34 ECONOMICS OF INDIA AND PAKISTAN 

is largely due to infant and maternal mortality. With a reduction 
in the havoc caused by these, the expected span of life should 
become greater. 

As at present a very short expectation of life in India can 
only mean that labour and expense of bringing up human life do 
not yield a proportionate return. Persons are snatched away in 
the prime of their life and at a time when they would start 
making contribution to the welfare of the community. Being 
deprived of such rich lives India must needs be poor. 

13, Age Groups : The age composition of a country’s po- 
pulation can be represented in the form of a pyramid, the base 
representing the number of children born. All the children born 
do not survive. As we go up the pyramid, the numbers are cut 
down so that the pyramid becomes narrower and narrower towards 
the top. The dimensions and the actual shape of the pyramid 
reflects the survival rate in the country. India has got the highest 
birth-rate and the highest death-rate in the world. The Indian 
pyramid, therefore, has got the broadest base and the tapering 
upwards is also rather sharp. 

A study of the age distribution in India reveals that India 
has a very large number of children but few old men and women. 
Very few people survive after 50, Thus all their experience is 
lost to the country. In Europe a man goes on working till the 
age of 60 or 65, while in India he retires at 55 from Government 
service. The ordinary course of productive life in India is much 
shorter, 15 to 50, while in the West, it is much larger, 15 to 65. 
Thus. the effective populption in India is much smaller. 

14. Birth..Rate and Death-Rates : India leads the world 
both in births and deaths. The large number of bitths is due to 
the universality of marriage and the high fertility per marriage. 
The people are illiterate, ignorant and superstitious. They are 
incapable of exercising any conscious check on the growth of their 
families. They are superstitious enough to hanker for children 
in any number, provided they are males. .Their standard of 
living is so low that the increase in the size of the family causes 
little financial worry. 

But if more come, more die too. The high degree of infant 
mortality is due to early marriages leading to child-wives, ignorant 
motherhood, defective . midwifery arrangements, insufficiency of 
milk supply and the practice of drugging the child. Female 
infanticide was also prevalent at one time. The appaling poverty 
and widespread and ever-recurring epidemics mercilessly cut down 
the numbers. The labours of motherhood go in vain. 



POPULATION 35 

While the birth-rate in India has been practically steady at 
33, the death-rate per 1,000 has fallen from 31 in 1920 to 22 in 
1940. Prof. Gyan Chand, however, believes that due to the lack 
of reliable statistics in the villages these figures are too low and 
he puts them at 48 and 33, respectively.^ Compared with coun- 
tries in the West these figures are very high and speak of the 
terrible waste of human life and energy in this country as is shown 
by table X below : 

TABLE X 


Birth and death rates for 

Country 

Holland 

U.K 

Germany 

Italy 

France 

India 


some 


countries in 1930 


:th rate 

Death rate 

23 

9 

17 

12 

17 

11 

27 

14 

18 

16 

33 

22 (1940) 


With the progressive fall in infant and maternal mortality, a 
downward trend of the cholera and plague deaths, a falling 
death-rate and a steady birth-rate, there was bound to be a greater 
increase in population in the last decade — a 15 per cent increase 
in 1941 over 1931. This fall in the death-rate has created in 
addition a potential for a further increase in population, if no- 
thing untoward happens in the decade 1941-51.^ 

According to Mr. S. Swaroop,^ the fall in the infant 
mortality rate from 195 to 160 will result in a substantial addition 
of 6*5 and 11 million souls in 1951 and 1961, respectively, even if 
the death-rate falls no further. 


An insufficient or foul water supply results in a thousandand 
one diseases. Hook-worms, tape-worm and dysentery abound in 
rural area as the result of an impure and infected water supply. 
An ill-balanced diet without sufficient vitamins, as in rice-eating 
Bengal,” devitalizes humanity and reduces longevity. An anaemic 
human being is a happy hunting ground for all the diseases. 
Truly is it said that a nation lives and works on its stomach no 
less than an army. 

A scientific study of dietetics is an urgent necessity, although 
it can be said that the poor Indian with his low income is hardly 
in a position to buy a well-balanced diet which will include some 
milk, vegetables, fruit and meat. Such luxuries are beyond the 
means of more than 50 per cent of the population. There is a 
Laboratory at Conoor in Southern India for research in the' nutri- 


1. Gyan Chand, India's Teeming Millions 

2. Since this was written, the terrible famine in Bengal killed millions of 


people. . . 1 

3, S. Swaroop, Statistical Assistant in the office of the Director-General 


of Indian Medical Service. 



36 ECONOMICS OF INDIA AND PAKISTAN 

tional value of Indian foods. The results of this research arc 
published in the form of brief pamphlets. They should be made 
more commonly available to the people, through magazines and 
daily papers at the expense of Government. 

15. Migration : (a) Emigration to outside India.— In the his- 

tory of Europe, emigration has played a major part. It has been 
estimated by a German economist that in the 400 years since 
America was discovered, no less than 105 million people have 
emigrated from Europe and that in the 19th century alone 31 
millions migrated to America and elsewhere. Between 1B50 and 
1900 the U.K. lost no less than 15 million people in this way.^ 

Emigration has played an insignificant part in the movements 
of Indian population. She has ordinarily no more than about 
three million people resident in the other parts of the British 
Empire and only about 103,000 in foreign countries like Dutch 
East Indies, Dutch Guiana, Madagascar, U.SA., etc. Ceylon, 
Burma and Malaya have as many as two millions out of the three 
in the British Empire.*-^ Essentially the Indian is a home-loving 
animal and is chary of leaving the place of his birth. 

Most of the emigrants from India are manual workers who 
arc either indentured or have gone out under a special system of 
recruitment. The rest are either business-men or artisans who 
have voluntarily gone out to improve their lot in life. In spite 
of the great increase in population in the last decade emigration 
has not served to relieve pressure. One reason why the Indian 
does not go out in large numbers is that he is not tolerated 
abroad, whether in the Empire or outside. The recent Pegging 
Legislation in South Africa is a case in point. The standard 
of living in the Dominions is higher than that of the Indian 
immigrants, hence the restrictions on their entry and the 
segregation of those already settled. This is most unfafr, but such 
treatment is bound to be meted out to Indian citizens so long as 
India does not win the status of a Dominion. There are many 
parts of the British Empire in the tropics like British Guiana and 
Africa where the density of population is low and which are 
peculiarly Suited to Indians. Schemes of emigration from India 
to such places could be taken in hand with success if the colour 
bar was given up. 

(b) Migration luithin India * — Within India, too, migration is 
small on the whole, but it plays an important part in the 
economy of certain areas. Internal migration is of five kinds;^ » 

1. Ramaswamy, The Economic Problem of India, p. 45. 

2. Cf. The Indian Year Bwh^ I94i‘'42, p. 933. 

3. Census Report^ 19 iU 



POPULATION 37 

(r) Casual-, between neighbouring villages to visit relations or 
on casual business. 

0*0 Temporary, to 'visit fairs, to work as coolies, to visit 
places of religious worship, etc. 

(iii) Periodic or seasonal, to reap harvests, to graze sheep on 
the higher ranges of mountains in the summer, etc. 

(iv) Semipermanent, to earn a livelihood at distant places 
always with the idea of coming back, e.g., to labour in factories in 
Bombay and Calcutta or to serve as domestic servants in the 
citiek 

(v) Permanent, e.g., to settle in the canal colonies in the 
Punjab, 

The tea gardens in Assam import all their labour from Bihar, 
Madras and C.P. while the fertile lands in the Brahmaputra valley 
have attracted settlers from Mymensingh and East Bengal^ The 
tea-estate labour in Assam is now secured under fixed conditions 
and is well looked after. 

The Bengali is, as a rule, averse to work in the mines. Hence 
most of the industrial work in Bengal is done by immigrants from 
Bihar, Orissa and the East U.P. 

Bombay too gets most of its labour from outside. The 
Punjab, U.P., and N.-W.F.P. on one side, and Hyderabad and 
Madras on the other are major contributors. 

The stalwart Punjabi is ubiquitous and is found almost every- 
where working as a technician, a taxi-driver or a policeman. 

16, - Public Health : The Indian is uneducated. He knows 
little and cares less about the laws of sanitation and health. The 
climate of the country is favourable to the spread of diseases not 
known in temperate areas. It has been rightly said that India is 
one of the greatest cesspools of infection for plague, cholera, 
small-pox, malaria and dysentery. Intestinal worms also play their 
insidious part in undermining the health of the villager. Tuber- 
culosis works untold havoc. The Royal Commission on Agricul- 
ture deplored *. “ Malaria slays its thousands and lowers the 
economic efiiciency of hundreds of thousands.’’ Malaria is the 
largest public health problem in India. Deaths from this disease 
number about a million, and the number of cases is about 100 
million per year. . . 


1» Census Report, 194U Vol. I. 



38 


ECONOMICS OF INDIA AND PAKISTAN 


A malaria map of India has been prepared by the Malaria 
Institute of India. Mr. Yeats remarks about it Everyone 
interested in India should study the map which might well be 
put on the walls of schools and similar buildings.’' This map is 
given on the opposite page. It divides India into epidemic, 
endemic, hyperendemic and non-malarious areas and is thus very 
instructive. It will be seen from this map that India has very 
few areas which are free from malaria. Unless the Indian works 
from below, vesents the mosquito and declares total war on it, 
malaria will take its yearly toll. Mere government efforts will 
not be effective. One of the most important aspects of the 
Rural Uplift Campaign should be the destruction of the mosquito. 
Fever is not something to which the Indian is borne and which 
must be borne. Its root-cause must be decimated. 

17. Marriage in India — its Universality : Marriage is uni- 
versal in India. Religion advocates it. Social customs require it. 
A Hindu cannot aspire to salvation until he has a male issue to 
perform his funeral rites. No considerations of future poverty 
restrict marriage — a wife is a cook, a drudge and a mate. The 
poor man has no intellectual interests, hence over-indulgence in 
sex. A child is not a burden but an asset as he starts paving his 
way at an early age. 

The 1931 Census figures indicate that 47 per cent males and 49 
per cent females were married. These figures are the highest for 
any country in the world. Nobody, Hindu or Muslim, abstains 
from marriage if he can possibly help it. 

Child Marriage , — Another important feature of Indian society 
is early marriage. The Sarda Act fixes the age of marriage for 
girls at 14. It is in advance of public opinion, and does not 
operate in the Indian States. Child marriage works havoc with 
health and physique and as a Census Superintendent feelingly 
remarked, ‘‘ thousands of child- wives march from the nuptial bed 
to the funeral pile.'’ There is now a tendency for postponement 
of marriage in better class families, but more for males than 
females. 

There is a very large number of widows in India — ^more than 
9 millions — between the ages of 15 and 40. Hindus have 124 
widows, aged 15 to 40, per 1,000; while Muslims have only 91. 
Amongst Hindus widow remarriage is religiously prohibited. This 
^ is a great check on the growth of population. 

The 1931 Census figures for married persons were exceptional 
_ as due to the anticipated operatio n of the Sarda Act (from 1931), 

1. Census Report, 1941, VoL I. 





40 


ECONOMICS OF INDIA AND PAKISTAN 


people married off their daughters in 1930 in large numbers. 
Anyway, it is a revelation that boys and girls are mirricd. below 
the age of 5, as the following table shows : 

TABLE XI 


MARRIED PER 1,000 OF EACH SEX 

Males Females 


Ages 

1921 

1931 


0-5 5-10 10-15 0-5 5-10 10-15 

6 32 116 11 88 382 

16 79 149 30 193 381 


18. The Population Problem in the West : Before the war 

of 1939-'45 and more so during it, the nations in the West have 
been pining for greater numbers. English philosophers^ have 
been visualizing with dread a time when a pram with a kid in it 
will be a rarity and will attract hundreds of old fogeys on the 
roadside. The French have been offering concessions in educa- 
tion, taxation and railway fares for larger families, but with little 
success in their objective. Too few babies” was diagnosed by 
M. Petain as one of the pauses of the debacle in France in 1940. 
Hitler adopted well-known totalitarian methods to increase a 
falling birth-rate. Persuasion and compulsion were skilfully 
mixed. Mussolini exhorted the Italians to multiply to reach the 
60 million mark. Abortion and birth-control propaganda were 
penalized and a deliberate pro-natalist policy followed. Mother-^ 
and-child days were celebrated and prizes awarded for bigger 
families. It was emphasized that with a falling population one 
did not create an empire but became a colony. 


AH these European Powers were anxious to have more num- 
bers in spite of the fact that they had increased considerably 
between 1870 and 1930, certainly much more than India, a 
is shown by the following table. 


Country 


Germany 
Italy 
Fra nee 

England and Wales 
Europe ... 

India 


TABLE XII 

Population in millions Increase per cent. 


1870 

1930 


41 

64 

56 

27 

41 

52 

37 

40 

8 

23 

•40 

74 

303 

506 

64 

265 

353 

33 


In spite of the decimation caused by World War I, the popu- 
lation of all western countries, ex cept France, increased between 

L McCleaw, G. F., The Menace of Britisfi Deopuplation ; Reddaway, W.B., 
Economics of a Declining Population, and Glass, D.V., Population, Policies and 



POPULATION 


41 


1911 and 1921 at a much higher rate than that of India which 
increased by 1*2 per cent only. 

Malthus has been proved a false prophet — at least so far as 
Europe is concerned. Its population has increased, not in a 
geometrical progression, but steadily, and a further increase is 
anxiously longed for and actively sought after. At the same time 
the processes of material progress have been accelerated. There is 
more wealth and prosperity. Public health measures have put 
natural positive checks on population at arm’s length. Famines 
and epidemics are memories of the past. The standards of life 
have shot up and man has refused to breed at previous rates and 
in numbers desired by the rulers. 

As a consequence there are fears that industrially advanced 
countries will not be able to keep up their numbers. Their net 
reproduction rate is less than one — as is evident from the table 
below taken from the League of Nations’ Statistical Year Book for 
193940, 

Country Year for which figure is available Net Reproduction Rate 


Austria 

1935 

0*64 

Britain (England and Wales) 1936 

0 76 

France 

1939 

0-9Z 

Germany 

1936 

0*93 

Australia 

1939 

098 

U. S. A. 


1*00 

Canada 

► 

1:09 

Italy 

1935*37 

1*13 

South Africa 

1939 

1*30 

Japan 

>» 

1*44 


Dr. Kuckzyuski’s researches similarly show a declining fertility 
in all highly industrialized countries in Europe. Dr, Charles 
proves the existence of similar conditions ‘ in Australia. He 
concludes, “ whatever changes in mortality ensue, nothing can 
arrest a continuous decline of the population in Britain and 
elsewhere.” This decline in Britain is not due to adversity, nor 
is there any evidence of an increase in physical sterility,” 
According to Prof. Harrod, there are two main causes for this 
decline : — 

(1) The high level of prosperity and welhbeing that man has 
achieved for himself. Parents often prefer to go in for a Baby 
Austin rather than a human baby as the latter adds to their 
economic liability, the former to their pleasure and comfort. 

(2) The use of efficient Contraceptives. Mothers in old times 
had a raw deal. Those who went through the trials and tribula-' 



42 


ECONOMICS OF INDIA AND PAKISTAN 


tions of having large families were worse off in health and wealth 
than their friends who avoided this service for society. Hence 
the invention of efficient contraceptives induced them to throw 
in their lot with the better-dressed and better-fed.^ 

19. The Population Problem in India ; The question is 

often asked whether India is over-populated. In order to be able 
to answer this question we must know what over-population 
precisely means. The idea of over-population is closely connected 
with the concept of optimum population. For every country 
there is an ideal number which it can maintain in reasonable 
health and efficiency. The optimum number is not an absolute 
number, it is relative. It is relative to the economic resources 
and the extent of their development. If the resources have not 
been fully developed even a small population may be considered 
excessive. If, on the other hand, the resources are more fully 
developed, even a large population may be adequately supported. 

There is a certain number which can turn the resources of the 
country to her best advantage. If the actual number were less 
than this optimum, the per cap! a income would be less than it 
can be, for the number is insufficient to develop the resources. It 
is, then, a case of under-population. If, on the other hand, there 
are too many people, then the -resources are thinly spread over 
and even then the per capita income is less than it can be. It will 
be then a case of over-population. The term over-population, 
therefore, .means the number of people which has exceeded the 
optimum. 

A distinction is sometime made between state of over-popula- 
tion and the tendency to over-population. In the case of the 
state of over-population, the country is already over-populated 
and its per capita income is less than it could be. In this case, 
therefore, any diminution in numbers would lead to increase 
in per capita income. But if the population of a country is increas- 
ing in such a manner that the per capita income is decreasing, 
then there is said to be a tendency to over-population. In 
some countries, like India, there may be both a tendency to and a 
state of over-population. Prof. Carr-Saunders has defined over- 
population as meatiing that there are too many people in relation 
to the whole set of facts. 


Let us now see whether India is over-populated. Different 
1 expressed on the matter. There are some people 
who think that India is not over-populated. It is argued, in the 


I* Harrod, 
Home Affairs). 


R.F. Britain’s Future Population. (Oxford Pamphlets 


on 



'POPU.LATION 


43 


first place, that density of population in India is much lower than 
in most of the European countries, which are pining for still 
larger numbers and that the natural resources of the country are 
immense. This inference is certainly fallacious. Our potential 
resources are no doubt vast but they have not been yet tho- 
roughly and adequately exploited. When we want to consider 
whether a country is over-populated we must consider not the 
potential but the actual resources. Considering our existing 
resources and the extent to which they have been developed, there 
is not the least doubt that even the lower density is burdensome. 
The countries with higher density are materially much more 
advanced and they can well maintain larger .numbers than we 
can with our meagrely developed resources. There are reasons 
to believe that the per capita income in India would have been 
higher if our numbers were smaller. There are millions of living 
souls in India who do not pull their full weight. 

Secondly, it is contended that every successive estimate of 
out national income has shown an increase in the per capita 
income. How in the face of it, it may be asked, can there be any 
over-population in India? We can easily dismiss this argument 
by pointing out that increase in per capita income would have 
been much more substantial, if population had not increased 
so rapidly, Natibnal income has been increasing but population 
has also been increasing, so that the share of each individual is 
smaller than it would have been. 

Thirdly, it is pointed out that India has suffered from 
scarcity of labqur and that it looks paradoxical that there should 
be a scarcity of fcbpur in an over-populated country. But it may 
be pointed out in'''reply that it is scarcity not for unskilled manual 
labour but for trained skilled labour. In view of the deplorable 
lack of facilities for training industrial labour, there is nothing 
surprising in the phenomenon of scarcity of labour even though 
the country is over-populated. Further, the phenomenon of 
scarcity of labour is now a thing of the past. Since the unprece- 
dented economic depression of the thirties few industries in India 
have really experienced any serious shortage of labour. 

There is thus not much in the arguments of those who say 
that India is not over-populated. 

In case we wish to find a positive proof of over^ population in 
India, we may appeal to Malthus. Scientists like Darwin have 
emphasized the universality of the law of over-production as 
applied to living organisms. According to Darwin, ' every organic 
beinf naturally incrc''* at so high a rate that, if not destrpyen, 



44 


ECONOMICS OF INDIA AND PAKISTAN 


the earth would soon be covered by the progeny of a single pair.” 
The offspring of a single pair of thrush in 20 years or so would 
multiply to such an extent that only one in 150,000 would be able 
to get a perching space on the whole face of the earth. The 
offspring of a single green fly, if all survived and multiplied, can 
weigh down the population of China at the end of the summer. 
Human beings are no exception to this all-perversive law of 
procreation. It has been estimated that a single couple is 
capable of producing, at the present rate of increase, in 1750 years, 
a number of persons equal to the existing world population ; such 
is the prolificness of nature. 


On the ground of observations like the above, Malthus came 
to the conclusion that unless population is checked, it would 
sooner or later, outrun the means of subsistence. We have seen 
that Malthus has not proved a true prophet so. far as the Western 
countries are concerned. But the Malthusian doctrine finds a 
viery apt- illustration in the case of India. 

‘if we can show that population in India has gone on increas- 
ing unchecked, then we shall have a strong presumption in favour 
of the/ state of over-population iii India. For this purpose 
we shall have to see to what extent the various checks contem- 
plated by .Malthus have been iii operation. These checks are : — 

Lower marriage - fate;-^In some European countries 
married life is not supposed to be the normal condition in life 
and thete is a large number of bachelors and spinsters. But in 
India, as . we have seen above, marriage universal. For the 
illiterate marriage is a sort of religious farman and some social 
obloquy attaches to an unmarried person. Everybody in India, 
therefore, marries either by choice or under social or religious 
injunction. 


(b) Lower fertility per marriage . — Universality of mtarfiage 
j increased population if only less number of 

children were born per marriage. Lower fertility could be achieved 
by marrying late, through deliberate self-restraint or by the use of 
contraceptives. But marriages take place very early in India except 
in the case of a microscopic minority of the highly educated 
tamilip. Also, from consciously keeping down the numbers, the 
maprity of the population are' keen on having children and 
actively believe in the doctrine, He who gives the mouth will 
also supply the food.” The deliberate checks to the growth of 
population are thus conspicuous by their absence. 


fecundity. A distinction is sometimes drawn be- 
tween fecundity and fertility. Fecundity means, the power of 



POPULATION 


45 


procreation and fertility the actual increase, A lower fecundity 
might mean a less number of issues. Some writers believe that an 
Indian possesses a poorer physique, a lower vitality and hence a 
lower fecundity. This should have, therefore, meant lower fertility. 
Although this conclusion is of doubtful validity, yet, if we sub- 
scribe to it for the sake of argument, it does not necessarily 
follow that less number of children should be born per marriage. 
In India, it is said, that even lower fecundity finds the fullest 
expression and results in larger families. 

(d) Infanticide . — At one time the practice of female infanticide 
prevailed in India and it might have exercised a serious check on 
population. But no one in his senses would advocate such an 
ignoble and criminal method of checking population. All social 
reformers ate happy that this black mark from India’s face has 
been effaced. 

Thus we see that what Malthus has called preventive’ checks 
do not operate to check population in India. On the other hand, 
positive checks like famine and epidemics have a full play and 
are very frequei^t and regular visitors to India. That is exactly 
what Malthus said. He warned that if population was not 
checked by the exercise of preventive checks, a country would 
become over-populated relative to food supply and then positive 
checks would operate to cut down the numbers. The pheno- 
menon of highest birth-rate may be taken as an acid test that 
the country is over-full with people. It cannot keep alive those 
who are brought into the world by reckless breeding. Dr. Hutton, 
the Census ' Commissioner, remarked in 1931 ; “Attention has 
already been drawn to the grave increase in the population of this 
country. The actual figure of the increase alone is a little under 
34 millions, a figure approaching equality with that of the total 
population of France or Italy.’’ In a similar vein Mr. Yeats talks 
of the 50 million increase in the 1931-41 decennium, an increase 
greater than the total population of any country in Europe except 
Germany and Russia. Although there is nothing surprising in 
the percentage increase of 39 between 1891 and 1941, which is 
less than that of England, Germany, Russia, etc., yet the total 
increase gives a shock. Was not Malthus right after all J 
The high maternal and infantile ' mortality rates, the short 
span of expected life, the low per capita income are sufficient 
indications of the fact that the country is overflowing with 
people. Serious students of population problems like Dr. Radha 
Kamal Mukerjee,^ Mr. P.M. Wattaland=^ and Prof. Gyan Chand'^ 


1. Food Planning jot 400 Millions. 

2. Presidential address at the All-India Population Congress, 1938. 

3. India's Teeming Millions. 



46 


ECONOMICS OF INDIA AND PAKISTAN 


are convinced that the Indian population is running ahead of the 
food supply. The recent food crisis in Bengal points to the 
deficiency in India\s food supply to maintain her children. Dr. 
P.J. Thomas thinks that, considering the increased manufacture 
of cloth, sugar, cement, etc., the Indian industry is very much 
ahead of the population increase. We cannot agree with this 
view, for the standard of living in India is still dreadfully low. 
No deliberate checkshre employed to restrict numbers. Marriage 
is universal. There is chronic unemployment in the country. All 
these factors positively point to a state of over-population. 
Numbers have already crossed the optimum figure and an abate- 
ment would certainly result in a betcerment of conditions. There 
are few economists now who seriously question the contention 
that India is over populated. 

20. Remedies : The fact of over-population can be readily 
conceded. Let us now examine the various remedies suggested. 

(a)’ Voluntary Checks : There is hardly any room for doubt 
that the positive checks pictured by Malthus do work in India in 
the absence of cPnscious or preventive checks. As a result of 
unrestrained procreation 'millions obey the inexorable law of 
nature _and .go to fatten the earth which could not fatten 
them.'’ Infantile death-rate is So high because of the lack of 
sufficient nourishment. This weeding out is a very painful 
process arid brings infinite suffering in its train. Poverty encoura- 
ges' breeding and larger numbers result in greater poverty. Thus 
a vicious circle is set up which has to be broken through at all , 
costs to relieve this misery. 

(f) Mora/ Restraint , — Further increase in numbers must be 
restrained. With erihaiiced material progress, a planned utilizia- 
tion of natural resources, and greater industrialization, it • is- 
possible for India to support a bigger population a hundred years 
hence. Today, however, with a foreign government conserving 
British, interests in this country, it is Essential to cut our coat 
according to our cloth and to exercise a deliberate control on 
turther increase of numbers. 

Deliberate r&traint‘and voluntary separation, however, are 
not an easy business and will not serve to check births, human 
nature being what it is. 

(a) Artificial Birth^controL — The use of contraceptives to 
control birth is believed by some medical men to be harmful to 


1. The Royal Colnamissiohcyn Agrieulcute, 1929. 



PDPULATION 


nerves. It is also asserted that a dissemination of ktrowkdge of 
contraceptives will encourage promiscuity and immorality. They are 
further supposed to be beyond the pocket of the poor man. In spite 
of the objections, however, it is essential to open and maintain 
clinics at public expense in order to initiate young married couples 
into the hse of and need for birth-control methods There may 
be an abuse of this knowledge in early sta^s, but the gam from 
putting a stop to the “ torrents of babies wiU be far greater 
fhan the harm done. There is no other equally efficacious method 
to keep families within reasonable proportions, ^r Ardeshir 
Ddal, the Member for Planning and Development, Government 
of India, said, in a speech jn Canada on July 18, 1945, that a 
policy of birth-control to raise India’s economic production and 
national income was urgently needed. Mrs. Margaret Sanger, the 
well-known American exponent of birth-control, commenting on 
India’s need for birth-control, said. An attempt to raise the 
standard of living and the per ^pita income of , 

India without corresponding efforts to control their fertility 
would be a complete failure.” Prof. Cyan Chand also suggests 
the reduction of birth-rate in India by means of voluntary clinics 
and propaganda agencies until the country ,is able to change the 
“ whole set of facts” mentioned by Prof. Carr-Saunders. 

The only cogent objection to the use of contraceptives is that 
the intelligent and strong may start using them, leaving the 
ignorant and the weak to propa^te the species 
about a deterioration in the quality of ^9- u 
are remote in India, where both sexes have an ingrained instinct 
to have a mafe issue. And under these circumstances even 
, sSibay plan may lead to a Wsher teth.^te than a 
unless active steps are adopted to control numbers. 

SSm the Kn. “Plan or Perish No activity o£ life, social 

or economic, can be safely neglected. 

The science of eugenics is in too early ^ stag" ^nd its appUca- 
tion too unpopular yet, eveii m a.‘i'^^ticed_ countries, to be 
considered. The individual will not give 'tPjai® hberty unless the 
State uses dictatorial methods. There is suffering from 

contemplating the compulsory castration those who are 

incurable venereal disease and consumption 
declared unsound of mind. 

Oil) Poitpcnrairn. of ma» SS 

birtta and death, 

Sl..“tKir^“o^d:or,LSpurpo.'of W the 



48 


ECONOMICS OF INDIA AND PAKISTAN 


increase in numbers, but it would certainly avoid the present loss 
in life and energy. Hence it is desirable for itself. 

(b) Migration : The pros and cons of emigration as a method 
of relief for pressure of population have been considered and it 
has been concluded that, with her present political status, India 
is not in a position to benefit from it. There is not much to hope 
for from internal migration too. There is not much ‘‘ culturable 
waste land except in Assam, C.P. and the Punjab.^ This 
‘‘waste land’’ too, however, in spite of the inferior quality of 
the available soil, is in the process of being utilized. Anyway, plans 
for a better distribution of population to correct its present 
lopsidedness may be undertaken for whatever little they are 
worth. 

(c) Public Health measures t A smaller but more healthy 
population is to be preferred to a bigger one which is sickly and 
short-lived. In the beginning, public health measures meant to 
reduce infant and maternal mortality and to checkmate the 
devastating effects of malaria, dysentery, consumption and worms 
will not only bring about an increase in numbers but also add a 
potential for further increase. Such measures will, however, 
improve the quality of the population and add to its longevity and 
relieve the present misery. In the long run they will set at work 
automatic brakes to put a stop to the rapid increase in numbers. 

^ • The problem should be tackled in all its various aspects as 
discussed below. 

(/) More Hospitals and Dispensaries . — ^India is very deficient in 
trained doctors and well-equipped hospitals. At present there is 
only one hospital for about 40,000 persons in the urban areas and 
conditions are much worse in the villages. The accommodation 
for ihdodr'patients is very inadequate. Patients have to wait for 
weeks and months before they can find room in good hospitals. 
A planned increase of hospitals is urgently needed. 

Travelling rural dispensaries could do immense good in rural 
areas. Training in Unani, Vedic and Homoeopathic systems could 
be put on a scientific basis and utilized to relieve suffering 
humanity. ‘ 

(ti) Res earch.--^T here, is urgent need for research in tropical 
diseases. Institutions of the type of the Calcutta School of 
Tropical Hygiene could be multiplied with advantage. The 
results of such research should he^ made available in the form of 
drugs and medicines through their manufacture on a mass scale, 
thps eschewing the pre sent dependence on foreign imports. 

i. See Chapn-r on Anricuicure. 



POPULATION 


49 


(Hi) Sanitation , — The inculcation of sanitary and .hygienic habits, 
both in urban and rural areas, is most important. The efforts of 
the public health authorities will not bear much fruit till the 
people have the will to improve. Intensive propaganda through 
exhibitions, demonstrations, lectures, magic lantern slides and the 
screen will have far-reaching effects in creating the will to 
improve. Tempting prizes for sanitation and cleanliness in the 
villages will stimulate efforts. The Bengal scheme of Circle 
Sanitary Inspectors may be considered for all-India adoption with 
necessary modifications to suit circumstances. Trained dais and 
midwives may be provided in villages with subsidies from local . 
and provincial governments. Rural Health Leagues with the 
village school-masters as the nucleus may be started. In fact, 
every weapon available to hand should be put in service to ensure 
an intensive propaganda to reach the remotest village and the most 
ignorant and self-centred bumpkin. 

(iv) Nutrition, — Dr. W.R. Ackroyd, Director of the Nutri- 
tional Research Laboratory at Conoor, in South India, has 
calculated* that a working man needs 2,500 calories of energy from 
the food he daily consumes. The present diet of the average 
Indian is very much deficient in respect of animal proteins and 
vitamins. It needs to be implemented by milk and its products 
and green vegetables to a large extent to maintain health and 
strength. Ignorance and religious prejudices are only partly 
responsible for the poor diet of an Indian. The main factor is 
poverty. ‘‘The prime cause of half empty stomachs is empty 
stomachs.”^ Investigations carried out in different places show 
that as the worker’s income rises he eats better food with a greater 
variety in it. The coming generations have to be more specially 
looked after and their vitality improved. Municipalities and 
District Boards should try to supply a certain quantity of milk to 
schoolboys in the middle of the day. 

(d) Increased Production : The experience of Europe has 
shown that a rise in the standard of' living automatically releases 
certain physical and psychological forces which reduce the 
tendency of population growth. Although the rationale of lower 
fertility has not yet been analysed and understood, yet there is no 
reason to believe that the same forces will not work in India as 
in Europe, once the living standards start rising. Population is 
not a snowball that will go on adding to itself till a catastrophe 
stops it. “Once the standard itself has become a constantly 
rising quantity it meets a check sooner or later, and then indivi.- 


1. Masani, M.R , Your Food (Tata Series on Current Affairs), p. 78. 



50 


ECONOMICS OF INDIA AND PAKISTAN 


duals are prone to seek a qualitative relief by a quantitative 
limitation.”^ A material betterment by improved efficiency will 
produce its natural effect on an individual’s procreative tendency. 
This betterment should be big enough for the average individual 
to take interest in his own future welfare and thus to control his 
own actions. Such a betterment can ensue only from a thorough 
planning of both agriculture and industry. 

(/) Agriculture . — Increase in agricultural production needs all 
kinds of improved irrigation, by canal, tube-well or dam, which- 
ever is suited to a. province and meets its particular problems. It 
further needs more agricultural machinery of the type suited to 
India, not necessarily large-scale machinery used in the U.S.A., 
Canada and Russia with their vast spaces.^ An intensive use of 
chemical fertilizers imported from abroad (U.S.A.) would increase 
the produce per acre and enable India to wipe off her present 
deficiency in rice. Fair and stable prices must, however, be 
guaranteed to the producers either through tariffs or through 
international action, for the ultimate objective is an improve- 
ment in the standard of life of all classes of people including the 
peasant. 

(a) Industry,— To attempt nothing because India has not a 
national government to put in operation a single revolutionary 
plan is shortsighted. The world war H, in spite of the handicaps 
on imparts of capital goods, has enabled Indian industry to develop 
in many directions. It has been recognized that India should be 
encouraged to meet her own needs of processed articles’^ and that 
Britain should content herself with supplying India with machinery 
and tools and goods of a finer quality not yet possible to manufac- 
ture in India. During this war, India has been largely exporting 
manufactured goods to the Middle Eastern countries.*^ This 
expprt is bound to reduce the pressure of population and to raise 
standards in India, ultimately creating the much desired tendency 
to a fall in numbers. 

(e) Education : Indian masses arc uneducated and ignorant. 
The 1931 Census literacy figures show India to be the most back- 
ward of all na,tions in this respect. 

1. Khaive, DiG., Economic, Studies^ p. 134. 

2. Sir P. M , Kharegat and Dpi Ackroyd at a Press interview at Delhi after 

re^esenting India at the United Nations Food Conference at Hoc Springs in 
U.S.A. in 1943. ■ ' .. ir- 

TOAi ^ Speech to the British Institute of Export, England, July 

1943. . 


4 i "See Cha|)tex on Foreign. Trade. 



POPULATION 


51 


No amount of propaganda can be effective here unless the 
impetus comes from the people themselves. Population will run 
up to the increased means of subsistence so Idng as education and 
birth-control sqherpes do not work simultaneously. 

Free compulsory primary education along with a comprehen- 
:sive plan for educating adults are essential.- The Punjab scheme 
of “each one, teach one*’ should prove very useful here. No 
scholarships and fee-concessions should be granted to any student 
in a college till he undertakes the work of making two persons 
literate. Russia has worked miracles by a planned system of 
education in a short period of time. The Punjab has made 
remarkable progress in the last decade in the literacy field — the 
increase in female literacy being 390 per cent and male 110 
per cent. 

For the whole of India the 1941 Census reports a 70 per cent 
increase over the 1931 figures, 60 per cent for males and 150 per 
cent for females. 

With such growth in literacy there is no reason to despair, for 
the ball gathers momentum as it travels further. Things are bound 
to improve and brakes to apply themselves automatically to the 
“ torrents of babies ” visualized by some pessimists; 



CHAPTER III 

INDIAN agriculture 

AGRICULTURAL PRODUCTION 

L. Introduction : After studying the general physical and 
demographical background, we are now in a position to approach 
the economic problems and organization of India in detail Take 
Agriculture first which is our premier industry. Its importance 
to the country and the welfare of the people is enormous. In the 
words of Sir John Strachy, “ It is probable that 90 per cent of the 
whole population of India are so closely connected with land that 
they may properly be called agriculturists/’ Agriculture provides 
food for our teeming millions, raw materials for our growing 
industries, business for the trading classes and revenues to the 
Government. One finance minister called the budget of the 
Indian Government a gamble in rains. Any step, therefore, 
which aims at raising the standard of living of our agricultural 
classes, ipso /ucto, aims at the general prosperity and industrial, 
commercial and administrative efficiency of the country as a 
whole. 

In the next few chapters we propose to study the facts and 
problems relating to Indian agriculture. The extent of cultivated 
and cultivable area, its distribution according to crops, produc- 
tivity of Indian agriculture, causes of low yield, systems of land 
tenures, equipment used by the peasant on his small and scattered 
holding, methods of marketing, agricultural finance and the role 
of the state in relation to this industry, all will receive our 
attention. The object throughout will be to describe the present 
position exposing its defects and to suggest reforms wherever 
necessary. The present chapter deals with agricultural production 
and its problems. 

2. Distribution of total Area: The total area of British 
India, according to village papers, is about 512 million acres. 
In 1940-41, this area was distributed as follows. Comparative 
figures for 1900-01 are also given :■ — 



1900-01 


1940-41 


Acres 

Acres 

Per cent of 


milhonst 

millions. the total. 

Under forests 

55 

63*2 

13*3 

Not available for cultivation 

82 

867 

17-0 

Cultutabie waste 

81 

97 8 

191 

Current fallow 

40 

45-2 

8-8 

Net sown with crops 

— ^ 186 

213-9 

41-8 

Total 

*«* 444 

Sira 

ll»0 



AGRICULTURAL PRODUCTION 


53 


Total sown, including area sown more 

than once in 1 940-41 . . . 247*9 

Area irrigated . . . 557 

The above table brings out the following facts : — 

(a) Inclusive of area under forests, 30*3 per cent of the total 
area is not available for being put under crops. 

(h) If leaving land “ fallow ” is also, regarded as essential, 
then about 40 per cent of the total area is not available 
for cultivation. 

(c) Culturable waste is about one- fifth of the total area. As 

we shall see later, most of it is not really fit for 
cultivation. 

(d) Three-fourths of the total cultivated area has to depend 
upon rainfall for the maturity of its crops. Hence there 
is a great element of insecurity in Indian agriculture. 

(e) Only about 16 per cent of the cropped area is sown more 

than once in a year. This indicates the lack of irriga- 
tional facilities and hence limitations on intensive 
cultivation. 

if) The area actually under crops in 1940-41 was only 42 per 
cent of the total area, /.e., about 214 million acres ia all. 
This comes to just about one acre of land per head of 
the agricultural population, or about 5 acres per cultivat- 
ing , family. On the basis of the total population of 
India, the cultivated area per .head is about four-fifths 
of an acre. In japan only l6.per cent of the total area 
, is arable and the cultivated area per head of population 
is one-third of an acre. But productivity per acre there, 
as we shall see later, is much higher due to more inten- 
sive methods of cultivation employed. 

3, Relative Importance of Crops : Of the total sown area 
(including area sown more than once), amounting to 248 million 
acres in 1940-41, 80 per cent was under food crops and the remain- 
ing 20 per cent was under non-food crops. Foodgrains alone 
accounted f or 75^ per cent of the total. 

1. Here it may be rem srked ia passing that this indicates a very unsatis- 
factory state of economy. Before the second world war India exported an 
insignificant amount of food materials- In fact she had to import rice from 
Burma, Thailand and Malaya. It is obvious that the food she produces is not 
enough for feeding her own population. Thus three-quarters of our population 
and four-fifths of out cultivated area is engaged just to feed the people, even 
that inadequately. In England about six people are enough to supply food 
directly or indirectly to one hundred of the population. This is a sad commen- 
tary pn tbc use of primitive methods of cultivation and backwardness of our 
e*conomle ^tganization. 



54 


ECONOMICS OF. INPIA AND PAKISTAN 


The following table indicates the relativa* importance (in a 
normal year) of the principal crops grown in India with respect to 
the area under each, its yield and the proportion of the total 
produce exported abroad. The statistics relate to the year 1939''40 
and include British India and some Indian States 

INDIA, INCLUDING SOME INDIAN STATES. 193M0 
Aiea 


Crop 


million 

acres 

%of 

total 

area 

Yield 

% of 
total 

Measure of export- 
yield ed 

Food Crops— 

1. Rice 


73-2 

28-6 

25-36 

million tons, 

TI 

2. Wheat 


34-01 

10-7 

10*75 

>» 

if 

0*1 

3. Jowat 

... 

33*39 

8*9 

6'50 

>» 

ti 

... 

4. Bajra 

... 

17*37 

5*4 

2*45 

$» 

»9 


5. Gram 

«•« 

13*04 

4*8 

3*29 

*1 

t* 

... 

6. Sugarcane 


3-62 

1*5 

4*59 

f* 

it 


Non-food Crops — 

1. Tea 


0*83 

... 

452*60 


lbs. 

78*9 

2. Cotton ' 

... 

21-35 

5*5 

4-91 


bales 
(400 lb.) 

59*6 

3. Jtitc 

... 

3-17 

T3 

9*74 

»> 

*» 

33*0 

(taw) 

4. Linseed 

• •• 

3-71 

TO 

0*47 


tons 

46*9 

5. Rape and Mustard 


6-11 

T4 

T12 

>* 

t. 

2*2 

6. Sesamum 


4-05 

0*9 

0-42 

» 

,1 

0*8 

7. Castor-seed 


TOO 

0*2 

0*10 


it 

... 

8. Groundnut 


8*20 

2*2 

3-15 

t) 

ti 

18*3 

9. Indigo 


, 0-04 

0-02 

0-005' 

♦» 

cwts* 


10. Coffee 

• •• 

0*18« 

' 0*04 

40-U«» 

11 

lbs. 

... 

11. Rubber 


.. Q-14 *0-03 

«(1938-39) 

3T40 

it 




It will be seen, that from the point of view of production, 
food crops (especially wheat and rice) are the most important, 
while from the point of view of exports, non-food crops like tea, 
cotton, jute, linseed and groundnuts are predominant. 

4. Study of Food Cro|]»s : A word may now be said about 
each of the principal crops produced indndia. 

(0 Rice “Rice is the rdost important crop of India. It is 
grown in low-lying, well-watered tropic^il regions. In 1942-43, 
there were 70*4 million acres under rice in British India. The 
total yield was 23 million tons. The area under rice was distribut- 



agricOltural production 


55 


ed as follows : — 




Province 

Area 


Area 

mill. 

Province 

mill. 


acres 


acres 

Bengal 

23-1 

U. P. 

7-0 

Bihar | 

14*3 

C. P. and Berar 

5*8 

Orissa j 

’ Assam 

... 5*1 

Madras 

... 10*4 

Elsewhere 

... 4*7 



Total 

... 70*4 


The average acreage in British India under rice for 31 years , 
ending 1942-43 was 68*0 million acres. The average yield for. the 
same period 25*4 million tons. Yield fluctuates much more than 
area, due to variations in rainfall, floods, insects, pest and diseases. 

Rice is a winter crop and is harvested from December to 
January. Different varieties of rice are grown in different parts 
of the country according to variations in local conditions. In 
Bengal, for instance, there are two harvests— the aws, or the early 
crop, and the aman, the later crop. Aus requires less rainfall than 
aman, is coarse and is eaten by poorer classes alone. In case the 
rains fail, it also serves as a provision against famine. In deltaic 
swamps, rice is practically th^ sole food crop. 

Since the separation of Burma, India has become a net 
importer of ricfe. In 1939-40, India imported 1*8 millioh tons of 
rice, mostly from Burma. The exports, on the other hand, were 
only 262,000 tons. Before the separation of Burma, India was the 
largest exporter of rice in the world. Import stopped after 1942 
due to Japanese occupation of Burma. Now it will soon be 
resumed. . . 

; (//) Wheat , — Wheat is next in importance to ri<;:c. It is a rahi 

crop and is harvested, from March to May. It thrives in condi- 
tions exactly the reverse of those suited for rice ; hence it is 
cultivated in places where rice .does not grow. The water 
supplied for growing it is by irrigation of one kind or another. 
India, next to the United States, Russia and Canada, is the 
largest wheat^producing country in the world. The total area 
lihder wheat in British India in 1942-43 was 25*9 million acres. 
The total yield was 9 million tons. The distribution of the area 
as follows ; — ' 

Millioii acres/ 


Punjab 


... 

, 10*4 

United Provinces 



7*6 

C.P. and Berar 

••• 

... 

2*5 

Bombay \ 



2*7 

Sind / 

Bihar and Orissa 


. 4 . 

1*2 



56 


ECONOMICS OF INDIA AND PAKISTAN 


According to the final all-India wheat forecast, the total area 
under the 19HA5 crop is 357 million acres and the estimated 
yield is 10*4 million tons. These figures represent an increase of 5 
per cent and 7 per cent in the area and yield respectively over 
the preceding year. 

Wheat is the staple food for the people of the Punjab, 
North-- West Frontier Province and the United Provinces. Else- 
where it is produced mainly for export. Very little of wheat is 
now exported to foreign countries. In 1939-40, only 7,800 tons 
(valued at Rs. 10 lakhs) were exported. Before the First Great 
War, India used to export more than a million tons of wheat a 
year. The fall in exports was due to low prices (before the recent 
war) prevailing in the international market and increased supplies 
from exporting countries, like Canada and Argentine. 

iiii) MHlets (Jowar and Bajra). — These are chiefly consumed by 
the masses in Madras, Bombay and Hyderabad, They are used 
also as fodder for cattle. In 1941-42, they were grown on 36 
million acres in British India, yielding 6*2 million tons in all. The 
principal growing areas in 1942-43 were : — 

Million Acres 


Bombay and Sind 

Jowar 

8'0 

Bajra 

5-8 

Madras 

4'7 

2 -6 ^ 

C.P. and Betar 

5*4 

... 

U.P. 

2*1 

3*0* 

Punjab 

0-8 

4-1 

^Figure fox 1941-42 



Very little of these grains is exported. In 1939-40, 7,000 tons 
of jowar and bajra valued at Rs. 7*45 lakhs were exported. 

(fv) Pulses. — Pulses- are grown throughout the country and 
form an essential part of the diet of the people. The chief 
growing areas, however, are the United Provinces, the Punjab, 
Bombay and the Central- Provinces. Gram is the leading one and 
is grown lar^ly in the United Provinces (5-6 million acres in 
19^42-43) and Punjab (4*7 million acres). Exports are comparatively 
small. In 1939-40, 73,000 tons valued at Rs. 95 lakhs were exported. 
In 1941-42, 12*7 million acres were under gram in British India. 

(v) In 1941-42, there were 5*6 million acres under 
maize in British India, which yielded about 2 million tons of crop. 
The main producing provinces in 1942-43 were United Provinces 
(2*4 million acres) and the Punjab (1*2 million acres). Maize is an 
important foodgrain for the poorer classes in Northern India. 

(vi) Sugarcane. — ^Area. under sugarcane in India is larger than 
in any other country of the world. In recent years, the sugar 
Industry has been enjoying protection* This has stimulated the 



AGRICULTURAL PRODUCTION 


57 


production of sugarcane all the more. At the beginning of the 
present century there were about 2h million acres under sugarcane 
in British India. Now there are about 4 million acres. The 
chief cane-growing provinces are : — 

1942-43 

Million acres 

United Provinces ... ... 1*8 

Bihar ... ... 0*4 

Punjab ... ... 0*4 

Bengal ... ... 0'3 

The average yield per acre of sugarcane in India is much 
lower than in other important producing countries and the 
quality also does not compare favourably with them. Since the 
beginning of the present century, the Government has given 
special attention to improve the quality and supply of sugarcane. 
A cane-breeding station was started at Coimbatore in Madras. 
The Provincial Agricultural Departments have introduced many 
new varieties of sugarcane, which give greater yield per acre. 

5. Non-Food Crops : (/) Tea. — With the exception of 
China, India is the biggest producer of tea in the world. The 
chief centres of production, with area under cultivation in 1939- 
40, are given below ; — 

Acres Acres 

Assam ... 438,300 Punjab ... 9,500 

Bengal ... 200,800 * U. P. •.* 6,600 

Madras ... 79,200 Travancore 77,000 

Tea is mostly grown for export. In 1939-40, U.K. tookSO 
per cent of the total Indian exports — which represented 79 per 
cent of the total Indian production for that year. The tea 
industry has derived considerable benefit from the recent war. 
The consumption of tea in India is rapidly growing, due to the 
propaganda activities of the Indian Tea Association. These 
activities, which arc also popularizing Indian tea in foreign 
countries (e. g., U.S.A.) arc financed by a cess (12 annas per 100 
lbs. since 1935) levied on tea export from India. In 1939-40, 
India exported 357 million lbs. of tea. 

in) Cojfee.— The cultivation of coffee reached its zenith in 
India in 1862, since when it has been declining. In most places, 
tea has been substituted where coffee was grown before. The 
decline has been due to the appearance of a destructive beetle and 
latterly to the competition of cheap Brazilian coffee in the 
European market. In 1939-40, the area under coffee was distri- 



58 


ECONOMICS OF INDIA AND - PAKISTAN 


bated as follows : — 



Acres 

Mysore" State 

96.200 

Madras 

' ' ... 49,600 

Coorg 

; • ... 37.500 

CbcHin 

1,800 

Travancore 

, 1,000 


In 1939-40,. India exported 168,000 cwts. of coffee, valued at 
Rs. 73 lakhs $ince 1935 there is an All-India Coffee Committee, 
which carries on propaganda ‘ (financed by a cess of 8 annas per 
cwt, on exports) to popularize this beverage. , 

(m) Oilseeds. — The main varieties of oilseeds grown in India 
are linseed, rape and mustard, sesamum and groundnuts. In 
1942-43 in British India alone,, there were 21 million acres under 
these and other oilseeds (cdcoanut,' castorseed, mowra, coriander, 
cumin, etc.). In 1939-40, India exported 849,000 tons of oilseeds, 
valued at 11*8 crores of rupees.* The main areas producing various 
kinds of oilseeds are : — 

Total British India. — 21 million acres, 

(a) Linseeds, — C.P., Bihar, Hyderabad (Deccan), 

Bombay and Bengal. 

(b) Rape and Mustard. — Chiefly in U.P., and to a smaller 
extent in Bihar, Punjab and Assam. 

(c) Sesamum.—Madras, C.P.^ Bombay, Hyderabad, U.P., 
Punjab, Bengal, Bihar and, Orissa. 

(d) Groundnuts. — Madras, Bombay, Hyderabad, C.P. and 
Berar. 

Linseed is mostly grown for export ; about one-fifth of 
groundnuts produced is also exported. The others hre not irn- 
portant as regards export. 

(iv) Cotton. — Cotton is the chief fibre crop of India. The 
black cotton soil of Deccan is best suited for its growth ; hence 
Bombay' Province is the important cotton-growing area. In 
1942-43, there were 11*5 million acres under cbtton in British 
India. A year earlier the acreage was 19*8 million acres. The 


producing areas are : — 

1942-43 

Million acres 

Bombay ... ... ' 3*3 

C. P. and Berar ... ... 3*2' 

Punjab ^ ... ... 2*3 

Madras ... ' ‘ ... 2*1 * 



AGRICULTURAL P^IODUCTION 


59 


There is a large export trade in cotton* About 60 per cent 
of the production is exported* After the outbreak of the recent 
war, especially after our great customer Japan joined in, the 
exports of cotton considerably declined. The Continent of 
Europe was also an important customer befpre the war* 

The quality of Indian cotton is generally regarded as inferior* 
It is said to be ‘‘ shorter in staple, poorer in spinning value, and 
smaller in yield per acre.^’ This inferiority is due to various 
causes ; (a) No incentive to improve quality because it is export- 
ed for mixing with wool and gets fair , price - as it is* (b) Inferior 
quality is extensively cultivated because it withstands drought 
better, (c)> Seed is separated in ginning factories and gets all 
mixed. Thus therei is little opportunity for selection of better 
seed* (d) The cultivator cannot readily find a local market for 
long staple cotton and thus does not grow it. 

Various attempts have been made to improve the quality and 
yield of Indian cotton. Mr. Jamshedji Tata tried to grow finer 
long staple cotton by importing seed from Egypt, but the experi- 
ment did not prove a success* In 1905, the Government of 
India appointed a cotton expert. About the same time the 
British Cotton-Grower’s Association advanced a sum of £10,000, 
to be distributed among the cultivators, to encourage the growing 
of superior cottons* The various Agricultural Departments have 
also been engaged in the task of evolving superior cotton 
varieties, indigenous as well as exotic* 

In 1917, the Government of India appointed a Committee — 
the Indian Cotton Committee—^ to examine the possibilities of 
increasing the supply of long-staple cotton in India, to suggest 
improvements in the existing methods of ginning and marketing, 
and to make recommendations in regard to the prevention of 
adulteration, damping and mixing, etc.” The Committee report- s 
ed in 1919 and made the following recommendations : — 

(a) Regarding the agricultural aspect, the Committee empha- 
sized that botanical work can improve the quality and increase 
the yield of Indian cotton. 

(b) As regards the commercial side of the problem, the Com- 
mittee recommended : (0 the establishment of open markets on | 

the. Berar system, (ii) the publication of cotton prices for the 
benefit of the cultivators, (id) the organization of cotton sale 
societies and the standardization of weights, and (iv) arrangements 
for protecting the seed from adulteration. 

* (c) The Committee further recommended that a Cer^ral 
East Indian Cotton Association should be established in Bombay, ; 



60 


ECONOMICS OF INDIA AND PAKISTAN 


in place of the several existing bodies, to control the whole 
cotton trade. 

(d) Finally, the Committee proposed the creation of the 
Central Cotton Committee, to promote the welfare of the 
cotton-growers, and to bring into closer touch the Department of 
Agriculture and the cotton trade. 


Action was taken on the recommendations of the Com- 
mittee, though after some delay* In 1922, the East India Cotton 
Association was formed. The year before, the Central Cotton 
Committee had held its first meeting. In 1923, a Cotton Trans- 
port Act was passed to prevent adulteration of cotton. It was 
first applied to Bombay and was then extended to Madras. Two 
years later, in 1925, a Cotton Ginning and Pressing Factories Act 
was passed. This Act was a corollary to the Transport Act. The 
Indian Central Cotton Committee has undertaken a variety of 
activities with a view to improve the quality of Indian cotton. 
It has established a technological laboratory at Bombay to carry 
out spinning tests, etc., has started, in co-operation with the 
Central India States, experimental work on cotton through the 
agency of the Institute of Plant Industry at Indore and is promot- 
ing special research schemes in the various provinces. The 
activities of the Committee are financed by a small cess, of two 
annas per bale, imposed on all cottons used in mills in British 
India and exported from India. In 1927, Cotton Markets Act 
was passed in Bombay, the provisions of which were later, in 
1939, incorporated in the Bombay Agricultural Produce Markets 
Act. Similar Acts have been passed in the Central Provinces 
and Madras. 

“ What is now clearly required ” says Dr. Burns is the 
production of longer stapled American cotton varieties for Sind 
and the Punjab. The Indian Central Cotton Committee has for 
the past three years been financing research at Mirpur Khas for 
this very purpose. Progress up to date has been rather slow and 
It seems desirable that more money and effort should be applied 
to this question.”^ 


(v) Jute, India is the sole producer of jute in the world, 
tsengal contributes about 90 per cent of total production ; and 20 
per cent of the income of a Bengali is due to jute. Though it 
occupies only 13 per cent of the total cultivated area of India, 
exports ot Jtite (taw and manufactured) account for more than 33 
jge ^ent or the total export trade of this country. During the last 

In India, Possibilities of Agriculturai Development 



AGRICULTURAL PRODUCTION 


61 


half a century or so, the area under jute has increased by 400 per 
cent* Besides Bengal, jute is also grown in Bihar, Orissa and 
Assam. Among the States, Cooch-Behar and Tripura grow jute. 
The area under jute (3*3 million acres) in various provinces in 
1942-43 was as follows : — 

Million acres. 

Bengal ... 2*7 

Assam ... '3 

Bihar ... '3 

During the depression of 1929-35 the price of jute fell to 

unremunerative levels* To assist the recovery of prices, the 
Bengal Government announced a scheme, in 1934, fora voluntary 
restriction of 1935 crop. Propaganda in favour of the scheme 
was carried on for three successive seasons, but the results of this 
voluntary effort were not substantial. In August 1940., the 
Bengal Jute Regulation Act was passed to meet the situation 
arising out of the war. This was applied on a compulsory basis to 
the crops grown in the interest of growers, to control fluctuations 
of prices of raw jute. 

The cultivation of jute is not an unmixed good. It has dis- 
placed rice in many tracts and has thus reduced the supply of 
food. Secondly, it exhausts the soil more rapidly than any other 
crop. Further there seems to be a connection between jute 
washing and malaria. And finally the danger of over-production 
is always there btcause it is difficult to estimate demand which is 
mainly foreign. 

(vi) Indigo . — Due to the German discoveries of synthetic dyes 
in the closing years of the 19th century, Indians export trade in 
indigo received a serious blow. The area under indigo was 
greatly reduced. In 1896-97, there were 1,688,901 acres under 
this crop, in 1913-14, there were only 172,600 acres. In 1939-40, 
only 37,500 acres were planted with indigo. This increased to 
65,000 acres in 1940-41. The principal producing provinces are : 
Madras, United Provinces, Bihar, the Punjab and Bengal. The 
future prospects for this crop are not very bright unless cultiva- 
tion and manufacture are made extremely cheap. 

(vii) Of?ium.— Area under opium has also been declining, 
though for different reasons. This has been the result of Govern- 
ment policy to stop all exports to China, Under the agreement of 
1907, and to other countries under similar agreements made 
subsequently. In 1906-07, there were 614,879 acres under opium 
in British India. This figure fell to only 5,816 acres in 1940-41. 
The cultivation of poppy is carried on under a system of Govern- 
ment licences. The chief producing province is the United 



62 


ECONOMICS OF INDIA AND PAKISTAN 


Provinces (15,594 acres). There has been no export of opium on 
private account since the year 1935-36. Thus India has made 
large sacrifices of revenue to meet her international obligations. 

iviii) Tobacco , — In 1940-41, the total area under tobacco in 
British India was VI miliion acres. The chief producing provinces 
are Madras, Bengal, Orissa, Bombay, the United Provinces and the 
Punjab, Most of the production is consumed locally. In 1939-40, 
57‘6 million tons of tobacco vvere exported which were valued at 
Rs. rS crores. As regards manufactured tobacco, India imports 
more than she exports. The Agricultural Research Institute has 
recently directed its attention to research with a view to improve 
the quality of tobacco. Heavy import duties are levied to 
stimulate the cultivation and consumption of Indian tobacco. 

(ix) Fodder Crops , — In 1940-41, there were 10*5 million acres 
(compared with only 2*94 million acres in 1901-02) under fodder 
crops in India. These were distributed as follows : — 

Million acres 


Punjab 

.* ... 


52 

Bombay 

.. 

... 

22 

U P. 

... ... 

... 

i-5 

Others 

•* 

... 

1*6 


But in view of the large cattle population, this area is not 
adequate. 

In recent years the Agricultural Department has been paying 
much attention to the problem of growing better fodder crops and 
of storing fodder. Among other grasses Egyptian clover and 
berseem have been successfully introduced in the various pro- 
vinces as fodder crops. 

(x) Cinchona , — ’Cinchona is mainly grown on Government 
cinchona plantations in Darjeeling and the Nilgiris. Government 
plantations were started as early as 1862. Since the Japanese 
occupation of Malaya and the East Indies, the' largest producers of 
quinine in the world, the supply of quinine has become a serious 
problem. Attempts are being made to plant more cinchona trees 
in India. 

(xi) Rubber , — Rubber is mainly grown in Southern India — 
Madras, Coorg and Mysore State. In 1939-40, the total area under 
rubber was 134,000 acres, which yielded 31*39 million lbs. of 
rubber ; the yield in 1940-41 was 35,530 lbs. Due to excessive fall 
in prices from June 1934 production and export had to be regu- 
lated under an international scheme. This considerably helped 
the market. In 1939-40, India imported rubber goods to the value 
of Rs. 148 lakhs, A serious shortage of rubber was caused for the 



, AGRIGULTUBAL. PRODUCTION 63 

Allies after the occupation of , M,alaya, Burma and East Indies by 
Japan. Efforts were made to plan^: morp rubber trees in India and 
also to €pd alternative sources of supplying rubber. Synthetic 
rubber was produced in the," United States and the United 
Kingdom and in India a creeper plant was discovered, the milk of 
which could be used for the manufacture of rubber. 

6. Necessity of Increasing Production : In order to improve 
the economic position of the Indian agriculturist, it is necessary 
that his earnings from agriculture and other available subsidiary 
occupations be increased. Attempts have been made from time 
time to estimate the per capita income of an agriculturist in India. 
Towards the close of the last century it was estimated that the 
minimum average income for all India was about Rs. 30 per 
head per annum. More recently, however, estimates have shown 
a higher level of income. The Statistical Branch of the Depart^ 
ment of Agriculture, Madras, calculated some years ago that the 
average annual income earned per head by agriculturists in the 
Presidency was about Rs. 100. Another estimate of Bombay put 
the figure at Rs. 100 for urban and Rs. 85 for rural areas.^ The 
income fell considerably during the years of depression and must 
have increased substantially since the phenomenal rise in price 
during the last few years due to war. Whatever the validity of 
these estimates of income^ the main fact remains that the vast 
majority of the rural population of India lives perpetually on the 
margin of subsistence. Every effort, therefore, towar4s raising 
this margin is urgently called for* 

The income of the agriculturist can be raised 

(a) By increasing the area under cultivation, as far as possible. 
In other words, by adopting the methods of extensive cultiva- 
tion, and thus increasing productivity per man and not neces- 
sarily per acre. 

({?) By inc:rcasing productivity per acre through utilizing the 
possibilities of intensive cultivation. 

(c) (a) and (b) above concern merely the volume of produc- 
tion. Volume is important, especially as it enables the cultivator 
to feed himself and his family before he can even think of 
producing for the market.- From the point of view of the market, 
however, volume alone is not enough. It is the sale price of the 
produce, that finds its way into the pockets of the cultivator, that 
becomes of great significance. ThisMe price partly depends upon 
tho quality of the product offered for sale and partly on the • 
agerxeies through which marketing is effected— leaving out of 


(1) India in 1930 - 31 , p. 156. 



64 


ECONOMICS OF INDIA AND PAKISTAN 


account the broad factors of supply and demand. The problem of 
marketing we shall discuss in a subsequent chapter. Here we shall 
be concerned, primarily, with the ii:y:rcase in the volume of 
production by extensive and intensive methods. 

7. Need for Increased Food Production : To increase the 
volume of production of food crops is essential not only from the 
point of view of increasing the cultivator’s income but also that 
of the amount of food available in the country for consumption 
of the agricultural and non-agricultural classes. At present India 
does not produce enough food for her population. At the out- 
break of the present war India had already become an importer of 
foodgrains. It was the stoppage of the import of Burma rice, as 
we shall see in a later chapter, that caused the tragedy of Bengal 
in 1943. In 1938, Dr.Mukerjee estimated for India a food deficiency 
of 12 per cent in a year of normal harvests. 

In India in a normal year the estimated^ production of the 
principal food crops is as follows : — 


Food 

Million tons. 

Food 

Million tons 

crops. 


crops. 


Cereals 

60*0 

Vegetables 

9*0 

Pulses 

7-5 

Milk 

23*0 

Fats and oil 

V9 

Meat, fish and eggs 

1*5 

Fruits 

6-0 ' 



In order to give a balanced diet of minimum quantity to 400 
million people of India, it has been estimated that the production 
of these foods must be increased as follows*'^ ; — 

Cereals by 10 per cent ; Pulses by 20 per cent ; Fats and oil by 
250 per cent ; Fruit by 50 per cent ; Vegetables by 100 per cent ; 
Milk by 300 per cent ; Fish and , eggs by 300 per cent. 

To make provision for the supply of animal food stuffs, 
necessary for the increased outturn of work and milk to achieve 
these targets, it is estimated that the present prgduction of oil 
cakes and other concentrates should be increased by 400 per cent 
and fodder by 55 per cent. 

Production, as we have said above, can be increased either by 
bringing more area under the plough, or by producing more from 
the existing area under cultivation or by both methods simulta- 
neously. Let us see what scope is there for increase in production 
of food as well as non-food crops. 


1. Memorandum on the Development of Agriculture by the Advisory 
Board, Imperial Council of Agricultural Research, p. 1. 

2. Third, p. 2. 



AGRICULTURAL PRODUCTION 65 

8. Possibilities of Extensive CaUivation : The table given 
below shows how the total area of India is being utilized and 
what changes have occurred in its distribution over a period of 
about 30 years ending with the year 1940-41. 

Million acres. ■ ’ Change in 1940^41 





over 1911-12 


1911-12 

1938-39 

1940-41 

-f* increase 
— decrease 


(a) Under Forests 

619 

68*2 

68 3 

-h 6*4 


(fe) Not available for cultivation 

1043 

918 

87*7 

- 166 


fc) Culturable waste 

88-8 

92-2 

97*9 

9*1 


(d) Current fallow 

49-7 

48*3 

45*3 

", 4*4 


(e) Net sown with crops 

20Z*6 

209-4 

214*0 

4- n;4 

56 

Total area 

507*3 

509-9 

513*2 

+ 5V 

11 

(/) Irrigated area 

’397 

53-7 

55*8 

+ 16-1 

40*6 


It will be seen that net area sown with crops increased less 
than 6 per cent during this period of 30 years. Even this increase 
was mainly due to development of iirrigational facilities. Area 
under irrigation increased by over 40 per cent. 

How far are there any possibilities of bringing more area 
under crops ? Let us take each of the uses to which land is put as 
shown in the table. 

(a) Area under forests . — During the period the area under 
forests has steadily, though only slightly, increased. Mgst of the 
increase had taken place by 1919-20 when it stood at 67*0 million 
acres. The figure varied slightly after that year round about 66 
million acres. 

There is no question of reducing the area under forests and 
putting it under crops even if it was possible. In fact our forest 
resources are not enough for the need of the country and the 
people. Efforts should be made to bring some of the land classed 
as “culturable waste’' under forests. This will supply more 
grazing facility, fuel, timber and wood for implements for the 
peasantry apart^ from other economic benefits to the country. 

(b) The area classed as “ Not Available for cultivcition ” has 
steadily been reduced making a difference of 164 million acres 
over a period of 30 years. The difference appears to be due to 
change- in the standard of classification. Some of it might have 
contributed to the increase under ** culturable waste.” But it is 
very improbable that any substantial part of it could be brought 
under the plougb. 



66 ECONOMICS OF INDIA AND PAKISTAN 

(c) Culttirabk waste has itlcreased during the pettod probably 
due to the reason given in the previous paragraph. The' figure 
now probably' Would have been higher due to this change in 
classification had not som'^ of' this class of land been brought 
under cc^kivatjiqn with the extension of irrigational facilities. 

(d) ‘* Current fallow has fluctuated from year to year with- 
out showing any definite tendency either towards increase or 
decrease. This is what might have been expected. But the 
significant fact is the high proportion of land kept fallow every 
year. This- reflects the primitiveness of our agricultural metliods. 
It is a remanent of, days when leaving land fallow was the only 
method of recuperating its powers. With scientific manuring 
and proper rotation of crops this area^could be saved from being 
wasted. In the Western countries fallow has been replaced by 
intertiHed“row crops like corn, potato and roots. 

As regards the uncultivated waste, the following table shows 
the distribution of such land according to provinces : — 


(a) 

(b) 

(c) 

~ Provinces 

Uncultivated 

Definitely known to 

. t 

‘ , waste other 

be cultivable 


than fallow 

out of (b) 


(million acres.) 

(millibn acres.) 

Assam 

' 17*6 


Bengal 

60 

014 

Bihar 

6*4 


Bombay 

09 

0M8 

C.P, Berar ... 

14 0 

5*15 

Madras ... i 

113 


N.-W.F.P. 

2*8 


Orissa 

32 


Punjab 

13'9 

3*18 

; Sind, • ■ . .T* 

11*1 


UP. 

^ 9*8^ 


Others ‘ ' 

u .. o-g , 


-“-Total Br. India , 


8 65 . 


‘fromithe above is^tatistfcs,“esp^^ (fi), it would seem 

that there is considerable sebpe for extensive cultivation in India* 
but in fact, as is shown by column (c),‘onIy about one-tenth of 
this area i§, definitely, Gujtur^ble. The^pressure qf population on 
land is such that already almost all the land, which was worth- 
while cultivating, has been brought under the plough. The 
areas „left are either Very inferior soils, or require expensive 
irrigation facilities before they can be cultivated. 

According to Prof. K. T. Shah, the main reasons for cultiv^ 
able land remaining at present uncultivated are ; . • . ; 



:AGRICULTURAL PRQpUCTIOM 


67 


(0 Lack of necessary capital for bringing such land under the 
plough, and providing it with the necessary water, drainage, 
cattle, etc*, making such land economically cultivable, 

(//) Absence of cheap, adequate transport facilities for dispos- 
ing -of the produce of such land, . 

(iii) The deficiency in drinking water supply and other essen- 
tials of life which make it -undesirable for the cultivator to 
occupy it, 

' “ (iv) The prevalence of disease carrying germs which render it 
unattractive for cultivation and habitation. 

Professor Shah's remedy is ; Culturable waste Jand can 
only be effectively brought under cultivation, and its produce 
economically disposed of, if all the scattered parcels of culturable 
waste land are treated as public property and exploited or deve- 
loped by the State as such*"^ 

: Professor Shah has discussed the matter from the long-period 

point of view as a part of an all-India plan on socialistic lines. 
From the short-period vie.wpoint, the scope for further extension 
of cultivation by private individuals is extremely limited. If 
finances aflow, however^ <a few millions of acres may be brought 
under cultivation by extension of irrigational facilities in the 
Punjab and Sind. In Assam the principal difficulty is scarcity of 
labour due to uncongenial conditions of life and work. - If there 
was scope for extension, statistics would have disclosed a greater 
rate of increase in cultivated area than is shown by the following 
figures ♦ - ' . . 

BRITISH INDIA INCLUDING BURMA 


Year. 

Net area sown. 

Average annual increase 


Million acres. 

over the previous date. 

1892-93 

195'9l 

+0*42 

1901-62 

199-71 

+2*59 . 

mo-ii 

223-06 

+0* 10 

1921-22 

223*18 

+0*10 

1930-31 

229*12 

+0166, 

1934-35 

226-98 

' -0*53’ 


'BRITISH' INDIA EXCLUDIN’G BURiil'A 

1935-36 ‘ 

.... ^ 209*71 

... . 

193^40 

... ' 209-96 ■“ ■ 

+006 

1940-41 

■ ’ 213*96 

+4-00 


It will be ‘ seen, that except during the . first decade of the 
present century, when much new larid was brought under cultiva- 


1'. Sfiah, K,T. t Principles of Planning (Padma Publication), 'p. 



68 


ECONOMICS OF INDIA AND PAKISTAN 


tion due to the extension of canal irrigation, the annual increase 
in the cultivated areas has been very moderate indeed. The 
increase in 1940-41 over 1939-40 is presumably due to the “ grow- 
more-food ’’ campaign. But this increase in area has not been 
accompanied by a proportionate increase in production as we 
shall see presently. 

More recently, in spite of the production under the stress of 
war, the area under cultivation of the important food and non^ 
food crops has not shown any remarkable increase as the following 
table shows : 

PERCENTAGE GROWTH OF AREA UNDER SOME 
IMPORTANT CROPS 1 


Base: Average of 1936-37 to 1938-39 


Crop 

Average 

1936-37 

to 


1939-40 1940-41 

1941-42 

1942-43 


1938-39 

Million 

Base 

Index 

Index 

Index 

Index 

Rice 

actes 

... 72*8 = 

ICO 

102*0 

ICO'3 

101*2 

• 102*8 

Wheat 

34-7 = 

ICO 

98*0 

100*5 

98*0 

99 0 

Groundnut 

... 8-0 = 

100 

104*8 

109*6 

88*2 

92 ’6 

Rape and Mustard 

5-5 = 

100 

107*2 

108*8 

111*5 

61*7 

Sesamum 

... 4*2 = 

ICO 

95-9 

95*4 

95*9 

97*7 

Linseed 

... 3-7 = 

ICO 

98*3 

95*0 

88*5 

71*8 

Sugarcane 

... 38 = 

100 

95*7 

120*8 

92 3 

94*3 

Cotton 

... 24*6 

100 

86*6 

92*9 

95*5 

76*0 

Jute 

... 2*9 = 

100 

106*0 

190*2 

72*5 

110*5 


The great fall shown under linseed, rape and mustard and 
cotton has been due to the practical disappearance of the chief 
markets to which these articles were exported before the war. In 
sprt^of the ‘‘ grow-m ore-food ’’ drive and falling off in the area 
under the non-food crops, the only increase under foodgrains has 
been in the case of rice. That also is very moderate. More 
recent figures show better results as regards foodgrains. In 
1943-44, compared with the average of three pre-war years, the 
area under all foodgrains was 6 per cent higher and production by 
10 per cent higher. Production is a matter of intensive cultiva- 
tion also. As regards area, this increase was at the expense of 
non-food crops like cotton and not due to any substantial in- 
crease in the new area brought under the plough. 


1. Figures taken from War and Indian Economic Policy” by Gadgil and 
Sovani, p. 62. . & 



AGRICULTURAL PRODUCTION 


69 


Regarding the possibilities of extensive cultivation Sve may 
conclude, therefore, that they are meagre as things are at present. 
The “fallow” could be eliminated by better rotation of crops 
and using other methods of recuperating land. This will involve 
a change in the character of our agricultural economy allowing 
more specialization of crops, so that different lands could be used 
for those crops for which they are best suited. This is not 
possible under the present subsistence farming, which compels 
the farmer to grow food on all kinds of soils. The culturable 
waste could be brought under the plough only if the State was 
willing and able to invest enormous capital in works of irrigation 
and other forms of reclamation. As long as these conditions are 
not present, we must rely on intensive rather than extensive 
methods of agriculture to increase the volume of production. 

9, Scope for Intensive Cultivation ; We have seen that the 
cultivated area per head of rural population in India comes to a 
little more than an acre and per head of total population it is 
about four-fifths of an acre. In Japan, the cultivated area per 
head of population comes to less than one-third of an acre. But 
productivity per acre in Japan is much higher than in India due 
to the application of intensive methods of cultivation. India has 
not even made a start in this direction. No wonder, that yield 
per acre in India is almost the lowest as compared with other 
countries of the world, whatever crop one might take. The 
following table makes this point clear ; 

COMPARATIVE YIELD IN LBS. PER ACRE OF CERTAIN CROPS. 



Wheat 

Rice 

Maize 

Sugarcane 

Cetton 

Tobacco 

Egypt 

... 1,918 

2,998 

1,891 

70,302 

535 

... 

Germany 

... 2,017 

... 

2,828 

... 

... 

2,127 

Italy 

... 1,383 

4.568 

2,079 


170 

1,139 

Japan 

... 1,713 

3,444 

1,392 

47,534 

196 

1,665 

U, S. A. 

... 812 

2.185 

1,579 

43,270 

263 

882 

Java 



... 

113,570 

... 


China 

ir . 989 

2,433 

1,284 

... 

204 

1,286 

India 

... 660 

1,240 

803 

34,944 

89 

987 


The case of Japan is very instructive for India. The conditions 
in that country are nearer to Indian conditions than in any other 
country. It is a country of small cultivators, who use very little 
of modern mechanical methods. The problem of irrigation, 
however, is not so difficult there as is the case in India. Japan 
demonstrates what can be done, even with meagre resources, by a 
peasant on a small area of land. The high yield per acre in 
countries like U.S.A., Canada and Australia is obtained by large- 
scale agriculture carried on over-holdings running into hundreds 



70 


ECONOMICS OF INDIA AND PAKISTAN 


■ of acres, by modern machines and scientific methods of cultiva- 
tion. This high productivity is even more significant since it 
also implies high productivity per man that is more important 
from the point of view of the >• standard of living of the people 
concerned. High productivity per acre, obtained by the labour 
of a large number of persons, may co-exist, as in Japan, with 
acute poverty of the cultivators. But when the population lacks 

^ alternative avenues of employment, as in India, it is better to aim 
' at high productivity . per acre even though it involves a larger 
number -of workers to be engaged. Saving of labour power can 
be economical only when more productive employments ate avail- 
able for* the surplus labourers thus saved. The .ideal position, 
however, in India would be that , alternative sources , of employ- 
ment should be created for her surplus population, so that land 
per family depending on agriculture may be large enough to, make 
up-to-date methods of cultivation possible. But so long as the 
pressure bf population oh' land remains what it is, intensive 
'methods of' cultivation should be siich as to involve less' eicpendi- 
tpre of land and capital' and more utilization of the available 
la^bonr pOjWer, . .. 

The great ' possibilities of intensive farming in India will he 
' realized frorn the following quotation from , a note by Sir, Mac- 
Dougall to the Central Banking Inquiry Committee. ‘Mf the oujt- 

■ put per acre in terms of wheat were raised. to that of France” 
wrote Sir MacDougall the wealth . of the co.untiry would be 
raised by £.669^000,000 a year. If the output were in terms of 
English production it would be raised by '£ h, 000, GOO, 000, in terms 
of Danish, wheat production, the increased wealth ;o India would 
be £ 1,500,000,000 per year.”^ ,. 

The yield is not only low but there are wide variations in 
India itself. For instance in 1940-41 yield 'of rice pef 'acre varied 
from over 1,000 lbs. in Madras to .just qver 500 lbs. In Bihar ; of 
wheat from 821 lbs. in Bihar to 385 lbs. in Bombay; and sugar- 
cane from 6,706 Ibs.Tn'' Madras to 1,918 Jbs. in the- Punjab and 
cotton from 182 lbs. in 'the Punjab to only 50 lbs. in Orissa. 

These differences may ‘ be accounted fot pattly by different 
fertility of the soil, rainfall and other natural factors. But to ‘a 
large- extehtbhey can be attributed to low standard of cultivation 
in backward fe'gfons. ^ ‘ 

Causes of Low. Yield.; The best way to discover 
remedies .|or low yield is to %id out the various pauses that 

r. teague of Nations ; Statwtical Year Book 1^3}-34. Tables 19-47. 

2, Report, Cental Bariking Inquiry* Cbiiimittee, App,''70i: ‘ • 



agricultural production 


71 


underlie this^^tate of affairs tci India: The causes of low yield 
are the same ^'s the causes of back\^ardness of Indian agriculture 
and anything that leads to agricultural improvemejit will auto- 
matically kad to higher productivity per mart as well per acre. 
Broadly speaking, anything that handicaps the cultivator in the 
proper exploitation of his, land is responsible, to a^ smaller or a 
larger extent, forthe low ‘productivity of Indian agriculture. 

The main, causes of lo\v yield in India are : — 

(a) Sub-division and' fragmentation of holdings whifch are a 
serious limitation on improved methods of agriculture. 

(b) Inferior seed, careless, cultivation, primitive implements,, 
inadequate manuring and inadequate irrigation, unseasonable 
rainfall, 

(c) Defective physical and chemical properties of the soil. 

(d) Due' to pressure of population on land, inferior lands 
have been brought under cultivation which have reduced the 
fverage production per acre. 

(e) Poverty, ill-health, ignorance and conservatism of the, 

peasant. ‘ , 

(/) Defective systems of land tenure which do not give 
enough incentive for better cultivation. ’ , - , 

. , (g) D?image caused to crops by man, beast, diseases and pests* 

11* ‘Rezneilies against^ Low Yierld ; It would appear from 
thei ab6ve list that the inv^tigation of the causes of low 
productivity of our ' agriculture involves the study of all the 
V^rious"aspects of the Indian agricultural economy. ‘ Each of thesq 
subjects will claim our attention in the following chapters of this 
booki" We shall discuss the probleriis bf Holdings, Land Tenures, 
Methods of Cultivation and Equipment, Irrigation and Famines. 
The various kinds of soils found in India have already received 
our attention, -and the problem of soil improvement will receive 
bur attention later. Here we’ may give, in a general way, the 
remedies ’ against low yield usually suggested by experts on the 
Wbject. Generaly speaking, yield per acre may be improved in 
the following ways : — ' 

(/) Better rotation of crops. 

(a) Greater specialization:' of cropping according to the 
qualities of the soils in different localities* 

(/(/) Sowing of improved and selected seed*. 



72 


ECONOMICS OF INDIA AND PAKISTAN 


(iv) Better nutrition of the plant. This involves better 
manuring, better cultivation, regular and sufficient water 
supply. 

(v) Reduction in the damage caused by man and beast, 
diseases and pests. 

As regards the rotation of crops unless the size of his holding 
is .considerably enlarged, the Indian peasant has very little to 
learn from the expert. The accumulated experience of ages has 
taught him what crops should follow what crops to give best 
results. 

Too much specialization of cropping in distant localities is 
not desirable, since a variety of crops grown by the same village, 
even by the same cultivator, serves as an insurance against price 
changes and unfavourable seasons. Reasonable specialization in 
the case of certain staples like cotton, wheat and oilseeds, how- 
ever, can improve the yield if intelligently planned by some central 
authority. 

As regards selection and improvement of seed, the efforts of 
the Departments of agriculture, provincial and central, have 
achieved very 'striking results in this connection. Improved 
varieties of wheat, cotton, sugarcane, etc., have considerably 
increased productivity per acre where they are sown. There are 
further possibilities in this connection. * ‘’i‘“ ^ 

Better nutrition of plants involves better methods of culti- 
vation, conservation and application of necessary quantities of 
manure and proper irrigational facilities, where rainfall is not 
adequate. Much has been done in this connection tdo, though 
much still “remains to be done. Canal irrigation has been 
extended, the Agricultural, Co-operative and Rural Reconstruc- 
tion Departments have been drawing the attention of the cultiva- 
tor towards the importance of conserving the manure that he 
wastes and burns. Lack of fuel facilities have, however, stood in 
the way. Better implements, suited to the small pocket and the 
small holding of the cultivator, have been evolved by the 
Agricultural Departments, though they have not been widely used 
due to the conservatism, but essentially due to the lack of capital 
resources,' of the average peasant. Utilization of the co-operative 
principle in this connection can work wonders, ' 

Finally, the problem of fencing against- man and beast can be 
simplified^ like so many other problems connected with cultiva- 
tion, by consolidation of holdings. The movement towards 
consolidation should be accelerated by propaganda, persuasion 



AGRICULTURAL PRODUCTION 


73 


and where necessary by the force of law* As regards pasts and 
diseases, the Agricultural Departments have done useful work in 
the investigation of the nature of such diseases and in suggesting 
methods of their control. These ideas require greater propaga^ 
tion. But before any of these remedies can give m^aximum results, 
a programme of general and agricultural education of a set 
minimum standard must make the peasant classes ready for 
receiving the new ideas* In the meantime, however, all efforts 
at improvement should continue. 

12. Estimated Possibility of Imptovement in Yield ; An 
expert for the Government of India has recently investigated the 
possibilities of increasing production per acre of some important 
crops. Some of his findings are given below. 

Rice . — Outturn of rice per acre can be increased by 30 per 
cent,' even by 50 per cent, by using better varieties of seed, by 
application of manure and protection from pests and diseases. 
The present yield is about 740 lbs* per acre. 

Wheat . — The last ten years’ average yield of wheat is 640 lbs. 
per acre. It should be possible to bring it up to 1,200 lbs. per acre 
in the case of irrigated wheat with better seed and manure and 
control of diseases. 

Joiiar. — An improvement of 20 per cent is possible. The 
present yield on irrigated lands is 1,200 to 1,500 lbs. and on barani 
lands it is 100-700 lbs. per acre. 

Bajra . — The all-India average is about 320 lbs* per acre. This 
could be increased by 25 per cent, by adopting dry farming 
methods, Le., to 400 lbs. per acre. 

Maize . — The present yield of 800 lbs. per acre could be 
increased to 1,000 lbs. per acre, i.e., by 25 per cent. In U.S.A. 
an increase of 35 per cent has been made by adopting the method 
of ‘‘ Hybrid Vigour.” 

Gram . — Provided disease resistant varieties are found, the 
yield can be raised from an average of 500 lbs. per acre to 600 lbs. 
per acre. 

Pulses . — Little experimental work has been done so far. There 
is need for experimentation. 

Sugarcane . — Already over 75 per cent of the acre under 
sugarcane is sown under improved varieties. The average, how- 
eVer, is only 15 tons per acre. This could easily be doubled. 



74 


ECOISfOMICS OF INDIA AND PAKISTAN 


Cotton. — The alUndia 30 years average yield is about 90 lbs* 
per acre. Though he gives no target figure, Dr. Burns thinks that 
yield can be increased with improved varieties, manuring, etc. 
The problem is of producing more of long staple and less of short 
staple varieties* 

Jute. — The present average of about 16 maunds per acre could 
be improved to 20 maunds by growing improved varieties and 
using manure. 

Fibres. — Apart from Jute and Cotton, other fibres are sann- 
hemp, Deccan hemp, Coir and agaves. These have received little 
attention so far. Considerable improvement in quality of sann- 
hemp is possible by improving the method of setting. A fibre 
research station is necessary to study the agricultural, commercial 
and technical possibilities of fibres. 

Fruit . — Statistics of the area and yield are not available but 
there are enormous possibilities provided India’s fruit products 
can compete with foreign products and quality of fresh fruit put 
on the market is improved. 

Potatoes . — Production can be doubled on the existing acreage 
provided fungal diseases are eliminated and improved methods of 
storage adopted. 

Thus it would appear that, even under the present conditions, 
productivity per acre can be increased roughly by one-fifth bylthe 
use of better varieties of seed, more adequate manuring and 
protection from' pests and diseases. Possibilities are much greater, 
however,, if our . agricultural economy is more fundamentally 
changed. 



CHAPTER IV 


SYSTEMS OP LAND TENURE 

1. Introduction : In the last chapter we studied the distri- 
bution of cultivated area and the relative importance and nature 
of crops grown on that area. Before we pass on to the considera- 
tion of the character of agricultural holdings and the equipment 
available to the cultivator for the exploitation of his holding — 
the subject of our next chapter — it is necessary to have some idea 
of the legal position of the cultivator with respect to the land 
that he cultivates. This is the subject of Land Tenure. We have 
to see in this chapter whether the cultivator has any rights in’ the 
land he cultivates-^e.g., rights of ownership, transfer by sale or 
mortgage, etc. — and if he has any rights recognized by law or 
custom, the degree and scope of such rights. 

The importance of the study of Land Tenure is two-fold: 
Firstly it is necessary from the point of view of the state, to locate 
the -ownership of a particular piece of land, because it iPthe owner 
from whom the State has to claim the land revenue fbr that land. 
Secondly, the repercussions of the system of land tenure are very 
far-reaching on the productivity of land and the general agricul- 
tural progress, apart from its political repercussions. For instance, 
an owner cultivator will exploit his land with much greater zeal 
and wiirbe much more anxious to introduce permanent improve- 
ments into it, than a tenant who has to share the fruit of his 
labour with a landlord. For agricultural advancement of a country, 
for social peace and contentment, therefore, a just and stable 
system of land tenure is a very necessary coadicion. The best 
system is one which, on the one hand, encourages the greatest 
production of wealth from the soil, and, on the other, 
ensures the welfare of those who work on it. 

2. Main Types of Land Tenure : A cultivator may stand in 
legal relationship to his land in any of the following capacities ; — 

(i) He may work as a tenant to the state. The ownership of 
land may vest in the state and the cultivator may have direct 
relationship with the state paying the latter a specified rent. The 
state can, in this case, legitimately claim as revenue from land an 
amount up to -the maximum indicated by the true economic rent 
of the land — the true surplus over cost of production including 



76 ECONOMICS OF INDIA AND PAKISTAN 

wages and normal profits of the cultivator. Such a system is called 
State Landlordism. This system is the aim of the various forms of 
socialism, though it may partially exist in capitalistic societies as 
well. 

(a) The cultivator may himself possess rights of ownership in 
the land. These rights may be of varying degrees. The owner- 
ship may be absolute—of course conditional on the payment of 
the revenue claimed by the state — or it may be relative, exercised 
under limitations imposed by law or custom in the interests of 
some other parties. The right of ownership, however, may be 
regarded as complete for all practical purposes if the owner can 
sell, mortgage, pass on to his descendants, etc., the landed property 
concerned. When a cultivator himself, along with his family, 
cultivates his land — usually quite a small holding— the system is 
called Peasant Proprietorship. A peasant proprietor pays no rent to 
anyone for his holding, but has to pay the land revenue claimed 
by the state. This system, on account of the various advantages 
that it possesses, is regarded by some as the best system of land 
tenure. “The magic of private property,” said the famous 
English traveller of the 18th century, Arthur Young, “ turns 
sand into gold.” The system breeds an independent, self-reliant 
and contented peasantry. The system is common in the Punjab 
but is handicapped by too small and fragmented holdings as we 
shall see later. 

(Hi) The cultivator may be a tenant — not of the state but of a 
private landlord. There is a large variety of tenures under this 
system, depending on the nature of the landlord's and of the 
tenants’ rights in land. Thus : — 

(a) The landlord may have full proprietory rights in the land 
paying land revenue to the state fixed by Permanent or Temporary 
Settlement. 

(b) The landlord may be a mere rent receiver whose rent is 
fixed by custom or law and cannot be changed except according 
to definite conditions laid down. 

(c) The tenant on the other hand may be an occupancy tenant 
who cannot be ejected from his holding as long as he pays the 
rent which is also fixed and cannot be increased except under 
given conditions. The general trend of tenancy legislation in 
India is towards conferring occupancy rights on tenants — “ fixity 
of tenure, fair rents^ and freedom of transfer” is the general 
slogan. 



SYSTEMS OF LAND TENURE 


77 


(d) The tenant may be a tenant-at-wilL In its worst form this 
system implies that the landlord can eject the tenant whenever 
he likes and can charge from him as much rent as he may be able 
to squeeze out. This leads to a floating tenant population and 
rack renting, especially where demand for land is acute, as in 
India, due . to the lack of alternative employment for the rural 
population. 


(e) The cultivator may be a sub-tenant or the tenant of a 
tenant. This happens when the tenant sub-lets his land and in 
the worst cases does not cultivate it himself but lives on the 
difference between the rent he pays to his landlord and that 
he charges from his sub-tenant. The sub-tenant may again sub-let 
a part or the whole of the land and the process may continue 
indefinitely. Thus sometimes the number of intermediaries 
between the actual cultivator and the proprietor becomes very 
large. In one estate in Bakarganj ’’ wrote the Bengal Banking 
Enquiry Committee, ‘‘there are as many as thirty intermediate 
(between the proprietor and the cultivator) tenures one under 
another.”^ This process of sub-infeudatton, as it is called, is mostly 
found in Bengal and other permanently settled areas, where the 
small demand of the state has left a large margin of the econo- 
mic rent to be divided among a large variety of parasites. Such a 
system is the worst from the point of view of agricultural progress, 
and recent tenancy legislation aims at discouraging such tenures. 
When the landlord becomes a mere rent receiver— Absentee 
Landlordism — and the tenant has no stake in the land, agriculture 
deteriorates and the cultivating population degenerates into^ agri- 
cultural labourers with no interest in the land they cultivate. 
Such situation is full of potentialities for political upheavals and 
in the interest of economic progress and political stability must 
never be allowed to exist. The best system of land tenure is the 
one in which there are no intermediaries between the State and 
the actual culivator of land, 

Baden Powell, one of the authorities on this subjep^ gives in 
the following table^ the various interests that may intervene. bet^» 
ween the cultivator and the Government : 


1. Report, para, 17. 

2. Land Revenue and Tenure in British, indict, p. 129, 



'/a 


ECONOMICS OF INDIA AND PAKISTAN 


One interest 

1. The 
Government 
is the sole 
proprietor, 
i.e,. State 
Landlordism. 


2 . 


Two interests 

1. The Gov' 
ernment. 

The ryot or 
occupant 
with a defined 
title (not a 
tenant) as in 
Madras, Bombay, 
Berar, i e , 
Ryotwari system, 
etc. 


Three interests 
1. The GoV' 1. 


2 . 


ernment. 

A landlord 2. 


(Zemindar, 
talukdar, or a 
joint village 
body regarded 
as a whole). 

3. The actual 
cultivating 
holders, 
individual co- 
shares, etc., 

Ue , Zemindari 
system. 


Four interests 

The Gov- 1. The Gov- 
ernment. ernment. 

Landlord 2. An over- 


Sub-proprietor, lord, 
or tenure holders. 3. An actu- 
3, The ryot or al proprietor 


actual cul- 
tivators. 


or landlord 
usually a vil- 
lage body. 

4. The actu- 
al cultivating 
holders, indi- 
vidual co- 
sharers, etc., 
i.e,, Mahal- 
wari system. 

The main types of land tenures thus may be classified as : (i) State Land- 
lordism ; (ii) Zemindari ; {Hi) Mahalwari ; and (iv) Zemindari, 


We shall now examine each of these land tenures and study 
the various problems that each gives rise to along with the 
remedies proposed or actually applied in the various provinces. 

3, State Landlordism : Attention may be first drawn to 
the theory of state ownership of land, as applied to India, which 
was a subject of considerable controversy for a long time until 
quite recently. Though a few authorities may still believe in it, 
in general the theory now stands rejected, though the full 
implications of this rejection will not be realized until the land 
revenue is levied according to the principles of taxation. The 
subject is not merely of a theoretical interest. Whether the 
land revenue is to be regarded as a rent or a tax, depends upon 
the view that we might take of the relationship of the state to 
the land. If the state is the owner of land, then like any other 
landlord it is entitled to the full economic rent of that land. If, 
however, the state is not the owner, then it can only tax land or 
income from land as it taxes incomes from any other form of 
property. Justice in that case will demand that the land tax 
should be levied according to the same principles as the tax on 
income derived from any other source. In that case, small land 
holders will be exempted from land revenue just as small earners 
6f incomes are exempted from income tax. Moreover, the land 
revenue will increase progressively for bigger holders as income 
tax rates increase for laiger incomes. The position at present is 
that though the state does not^ claim ownership to land, land 
revenue is not imposed according to the principles of taxation on 
account of practical considerations of finance. The fall in the 


1. With a few exceptions where such ownership does exist. 



SYSTEMS OF LAND TENURE 


79 


revenue will be so serious, it is said, as to impair most of the 
beneficent activities of the state, activities which are ultimately 
for the good of the land owners themselves. We shall again 
come to this subject in our chapter on land revenue. Here 
we may note the various arguments brought for and against the 
theory of state landlordism. 

In favour of the theory it is claimed that land is a free gift 
of nature and not the result of the efforts of any particular 
person. Hence its ownership vests in the community and is 
exercised through the state or the ruler. The state is entitled to 
the whole of the economic rent of the land, because this 
economic rent is “ an unearned ” income over and above the 
contributions made by labour, capital and organizing ability of the 
cultivator. Therefore, it is asserted, the rulers in the East and 
also in India have always claimed a share in the produce of land 
as owners of such land. 


To this the reply is made as follows : ^{a) Ricardian theory 
of rent which regards economic rent as unearned ’ income 
is only true under conditions prevailing in England or Ricardo s 
time and is not a full explanation of the earnings from land. 
Land, like any other factor of production, gives a surplus over 
cost under certain conditions when its demand is greater than 
supply. Earnings of land is essentially similar to earnings of any other 
factor of production in spite of certain peculiarities of land as such. 
Land possesses value because it can be put to more thaii one uses, 
and if it is put to one particular use some other has to forep 
service from such land. This represents the cost of land to the 
community and the payment made to attract land for one use 
rather than another does enter into the cost of production of the 
goods produced from it. From this point of view economic rent 
is as much earned as payment received by the owners of any 
other factor of production. 


(b) Moreover, all land does not earn economic rent. An unecp 
nomic holding, for instance, may give even less returns than, the 
legitimate rewards of the labour and capital used on it. JSIo 
surplus is there to be paid to the state even- if the latter is 
recognized as the owner of auch land. The first charge on 
cultivated land is the reward for the efforts of those who work 
on it. irrespective of the fact whether some of them have to do 
nothing because of the lack of alternative employments in the 
country for the rural classes. The lack of -alternative employ- 
ments is the fault of the social structure^and not of the cultivar 
tors and their dependents. 



80 


ECONOMICS OF INDIA AND PAKISTAN 


(c) It is untrue to say that rulers in India have always claimed 
ownership in land. They have claimed a part of the produce 
of the land, but^ this they have done in the capacity of a taxing 
authority, not as owners. Some oppressive local chiefs might 
have made and exercised claims of ownership, but such claims 
were tyrannical and had no basis in law. Similarly, during the 
chaotic period between the death of Aurangzeb and the consolida- 
tion of the British power all sorts of claimants arose to proprie- 
torship of land — some of these were recognized by the British 
Government for convenience of revenue collection~and in this 
way actual cultivators lost their ownership. In some cases claims 
were also made on behalf of certain ruling chiefs when the 
cultivators or other actual owners were not in a position to 
defend their rights. But such claims had no legal basis unless 
recognized by the supreme authority when established. 

(d) The British Government, since its consolidation in India, has 
never put forth any general claim for universal ownership of land, nor 
did the Hindu and the Muslim kings ever claim such rights as 
the Taxation Enquiry Committee^ of 1922 established with full 
evidence. Thus the British Government neither succeeded to 
any claim of over-lordship nor did it assert any such claim. In 
fact the British have been denying such claims and have been 
encouraging claims of private landlords regarding the ownership 
of the land under their control. In a despatch to the Secretary 
of State, dated 8th June, 1880, Lord Lytton’s Government 
observed : “ We do not accept the accuracy of the description 
that the tenure (of land in India) was that of cultivating tenants 
with the power to mortgage the land of the stare and that land 
is the property of Government held by the occupant as tenant in 
hereditary succession so long as he pays the demand. On the 
contrary the sale and mortgage of land was recognized under the 
native government before the establishment of British power. . . 
It has been one of the great objects of all the successive govern- 
ments of India since the days of Lord Cornwallis, if not to create 
property in land, at all events to secure and fortify and develop 
It to the utmost. The Government undoubtedly is the owner 
of a first charge the amount of which is fixed by itself on 
the produce of all revenue-paying land in India ; but over the 
greatest part of the Indian Empire it is no more the owner 
of cultivated land than the owner of a rent charge in England is 
the owner of the land upon which it is charged. If the charge is 
fixed so high as to leave nothing for the cultivator, such a 
maintenance as will keep him from deserting the land, it may of 

i. Indian Taxation Enquiry Committee Report. Raraa. 79-83. 



SYSTEMS OF LAND TENURE 81 

course be said either that property in land does not exist, or that 
it is worthless/’ 

Finally, we may record Baden . Powell’s conclusion on this 
subject. Looking at the matter from the practical point of view 
he writes ; ‘‘ The British Government has everywhere conferred 
or recognized a private right in land, and in large areas of 
country — Bengal, Oudh, and the whole of Northern India, for 
example — it has expressly declared the proprietary rights of the 
landlord and the village owners. It is then impossible to say 
broadly that the state takes a rent from the landholders regarded 
as tenants- The Government is certainly not owner. . . The 
utmost it does is to regard the land as hypotheticated to itself as 
security, in the last resort for the land revenue assessed upon it.” 
His final conclusion is ; “ The land revenue cannot, then, be 

regarded as a rent, not even in the raiyatwari lands.”^ 

It should be remembered, however, that our denying the 
theory of universal state landlordism in. India does not imply 
that the state owns no lands in this country. On the contrary, 
ownership of the state does exist in certain lands. For instance, 
the Government has full proprietary rights on waste lands and 
over the ‘‘ khasmahal” estates such as are found in Bengal and 
Madras which are under the direct management o£ Government. 
Similarly, in the canal colonies of the Punjab some lands are 
owned by the Crown and the cultivators are Crown tenants pay- 
ing rent to the state. In other words, in this country state 
ownership is the exception while private ownership is the rule. 

In the second place even if we may be able to establish that 
most of the land in India is privately owned, it does not mean 
that we take it as a final dispensation. If private ownership of 
land leads to deterioration of such land and the people cultivat- 
ing it, or it perpetuates social injustice, there is every justification 
to change the present system for a better alternative. This point 
we shall discuss at the end of this chapter. Let us here continue 
our discussion of the other existing systems of land tenure. 

4, Ryotwari Tenure ; In the Madras Administration Re- 
port for 1855-56" the Ryotwari system is explained as follows ; 

‘‘ Under the ryotwari system every registered holder of land is 
recognized as its proprietor and pays direct to Government. He 
is at liberty to sub-let his property, or to transfer it by gift, sale 
or mortgage. He cannot be ejected by Government so long as he 
pays the fixed assessment and has the option annually of increas- 
ing or diminishing his holding or of entirely abandoning it'.” 


1. Baden Powell, Land Systems of British India, Vol . I, p. 235. 



82 


ECONOMICS OF INDIA AND PAKISTAN 


The Bombay system is also ryotwari. In the Punjab colonies 'also 
the system of tenure is similar to the ryotwari tenure. “ In the 
great canal colonies/’ says Calvert ‘‘every single grantee or 
purchaser holds directly and individually under the state, from 
which he has derived his rights, and each is bound by his 
separate agreement to pay land revenue. This approaches to the 
ryotwari system of Bombay and Madras, except that the areas 
here are larger, as in those provinces each separate plot is held in 
separate agreement direct from the state and the holder may 
reject any of his plots if he does not consider it worth the 
revenue assessed upon it/’^ 

Some writers think that under the ryotwari system the state 
is the landlord. This is for three reasons : (a) the state can 
resume the land if the cultivator does not pay the land revenue ; 
(b) the waste land belongs to the state ; (c) the cultivator has the 
option of leaving the land if he thinks that it is not worthwhile 
cultivating in return for the revenue assessed. 

To this may be replied as given below ; 

(a) Ownership is nowhere absolute. In fact all property held 
by a citizen is held conditionally on the payment of the tax due 
on it. The state can resume any land if the demand of the state 
on it is not paid. 

(b) The waste land may belong to the state, but this does not 
serve as an argument for the state ownership of the cultivated 
area. The proprietary rights have been conferred in the case of the 
latter and not in the case of the former, until it is also brought 
under cultivation. Under the Punjab .Mahalwari system, however, 
the proprietary rights in the common waste of the village vest in 
the village proprietors collectively until it is partitioned. This is, 
however, merely a historical accident. 

The Government in Madras was inclined,” says Kale, to 
recognize such village communities (as in the Punjab) as they 
found in existence there, though the ties which bound the 
proprietors of land were not like those in Northern India, ties of 
blood and common ancestry, supposed or real, but ties of a long 
residence in the locality and of common interest. But the village 
community there was not recognized and was broken up when 
the ryotwari system was introduce^ in the Madras Presidency.”^ 

(c) That the cultivator was given the option to leave the 
land if he thought it not worthwhile the revenue assessed, also 

1. Calvert, Wealth and Welfare of the Punjab^ p. 170. 

2. Kale, Indian Economics ^ VoL II, pp. TSO-Sh 



SYSTEMS OF LAND TENURE 


83 


does not prove that the state regarded itself as landlord* This 
option was given not to preserve any proprietary right of the 
state, but in order to induce the cultivator to undertake the 
cultivation of land at a time when proprietary rights in land were 
not much valued* It was to assure the cultivator that he was not 
going to be forced to cultivate the land, that it was his free will 
whether to cultivate or not. 

We conclude therefore with Kale, that the so-called 
‘^'occupant of “Government land” in Bombay (and Madras) 
‘‘ is as much a proprietor of his land as his brother, the zemindar 
of Bengal, the only difference being, that, in the case of the 
latter, the land tax is perpetually fixed, whereas, in the case of the 
former, it is liable to periodical enhancement.”^ The view of the 
Taxation Enquiry Committee, however, was that though both the 
zemindar and the ryot were in possession of proprietary rights, 
subject to the payment of land revenue, in the case of the ryot it 
was not possible to arrive at an exact definition of the position of 
the landholder.*'^ But even this conclusion does not invalidate 
the position that under the ryotwari system the ryot in Madras or 
‘‘occupant” in Bombay possesses proprietary rights. 

5, The Mahalwari Tenure : Under the Mahalwari (or Joint 
Village Community) system of land tenure the land is held jointly 
by co-sharing bodies of village communities, the members of 
which are treated as jointly and severally liable for the land 
revenue. The most typical of such tenures is found in the old 
districts (outside canal colonies) of the Punjab. “ In the old 
settled districts of the North, Centre and East,” says Calvert, 

‘‘ the soil, but not always the minerals beneath it, is held in full 
proprietary right, subject to the payment of revenue, by the 
village community in common. The state is supreme landlord 
and retains important rights of resumption for public purposes^ 
or for serious crime or for failure to pay the revenue, or for 
refusal to accept the new demand for settlement, but these are 
so rarely used that the full rights of the village community 
are seldom disturbed and the rights of the state are apt to give 
way to the duties and responsibilities of a great landlord.” He 
adds a little further : “ If any owner abandons his land, it 

would be taken over by the proprietary body. Both in law and 
in practice the rights of the village community are carefully 
preserved ; they are the owners of ail the village “ common” or 
shamilat, with its trees, grass, etc*, and they own the site of the 
village buildings.”"^ 


1* Kale, Indian Economics, Vol* 11, p* 781. 

2, Taxation Enquiry Committee Report, Para. 83. 

3, Wealth and Welfare of the Punjab, pp. 169-70, 



84 


ECONOMICS OF INDIA AND PAKISTAN 


Land in the joint villages may be shared in a variety of ways. 
Three kinds of villages may be noted : 

(f) Ancestral villages, where the owners descend from the 
same ancestor. The share of each heir depends on his positiqn on 
the geneological tree. These villages again may be of three types : 

(a) Villages where land is not divided but is held jointly like 
the property of a joint Hindu family. 

(b) Those in which division takes place according to the 
ancestral share system (pattidari), 

(c) Those in which division is partial, though on the ancestral 
system (imperfect pattidari), 

{iO Non- ancestral villages in which sharing takes place under 
the customary systems or bhaichara principles. This sharing 
may take place according to a variety of ways — sharing in equal 
lots ; sharing according to the number of ploughs owned ; sharing 
according to share in water or in wells. The land, however, is 
still regarded as jointly owned. 

(iii) Villages in which existing holdings are recognized as they 
are and there are no definite rules for sharing. 

The rules of sharing in each case have arisen according to the 
ways in which these joint villages originated. These villages were 
formed in one of the following three ways ; — 

(0 Ancestral villages were formed by the descendants of a 
common ancestor. This ancestor may have been a founder, a 
grantee, a revenue farmer or a ruling chief reduced to the posi- 
tion of a landlord as in the United Provinces. 

(il) The owners may have originally belonged to an immigrat- 
ing or conquering class which allotted land according to their 
customary methods. 

(fii) The owners may have been a group of people who 
colonized the place and established cultivation on the joint stock 
principle. 

In a typical joint village the owners are themselves the culti- 
vators — peasant proprietorship. In some cases, however, land 
may be cultivated by tenants who pay rent to the owners either 
in cash or in kind (batai system). In some cases a comparatively 
large owner gives a part of his land to tenants to cultivate and 
work the rest himself, in others a small holder supplements his 
holding by getting some land on rent. The best results from the 
point of view of good cultivation are obtained, however, when a 



SYSTEMS OF LAND TENURE 


85 


peasant proprietor possesses just enough land which he can 
economically cultivate and cultivates it himself with the help of 
his family and perhaps a few hired labourers* Some people 
regard such a system as the ideal system under the conditions as 
they obtain today in India. The system of peasant proprietorship 
is the dominant system in the Punjab, though the holdings are 
not as large as one would like them to be. 

In the case of some joint villages (e.g., in Agra and Oudh) 
certain over-lords have arisen (talukdars) and original proprietary 
rights have degenerated into sub-proprietary rights or tenant 
rights. This brings us to the next system of land tenure — the 
zemindari system. 

6, Zemindari Tenure ; Under this system one or a few 
persons own a village or a collection of villages and are responsible 
for the payment of its revenue on the whole estate. Such 
villages are typical in Bengal, they also exist in Oudh and Agra, 
where they have talukdars, but they are exceptional in the 
Punjab. The Malguzars of Central Provinces are not landlords in 
the Bengal sense. A variety of landlord estates are also found in 
Bombay. In Madras also there are several great zemindars of 
Bengal type. 

The proprietary rights of the zemindars developed in the 
course of history due to several circumstances. Originally, lands 
belonged to those persons who or whose ancestors had cleared 
them by cutting the jungle or otherwise had reclaimed them. The 
rulers (except in the case of Inam and Jagir lands, etc.) levied a 
tax on such lands. During the period of political insecurity, 
unsettlement, foreign invasions and immigrations the original 
proprietors were dispossessed by the stronger immigrants or 
conquerors and were reduced to the status of tenants. In some 
cases these conquerors were in their turn expropriated by new 
waves of stronger elements. Many of the present landlords were 
revenue farmers and others were princes reduced to the status of 
landlords by foreign conquest. The proprietary rights of all these 
were later recognized' by the Government in turn for revenue 
payment. 

As a rule the owners* of these big estates do not cultivate 
them themselves. They are cultivated by tenants of various kinds. 
But' between the tenant cultivator and the landlord, who is 
responsible for the payment of revenue to the Government, are 
found in some cases what may be called the sub-proprietors, or 
those who have sub-proprietary rights. These are called by 
various names : — 



86 


ECONOMICS OF INDIA AND PAKISTAN 


(0 Tenured-holders of Bengal — They possess the privileged 
status of “ permanent heritable and transferable tenure held at 
fixed payment.’^ The Act of 1885 recognized all those as tenure- 
holders who were below the zemindars and owned one hundred 
bighas of land* 

(a) Pattidars . — They are also found in Bengal. They were the 
people who were given permanent managing lease for a part of 
the estate by the zemindars who found their estates too big to bear 
alone the responsibility of revenue payment. Pattidars in their 
turn created tenants called dirpattidars who had similar privileges 
and shared parallel revenue responsibilities. The Bengal Regu- 
lation of 1819 recognized such sub-proprietary rights* 

(///) Malguzars were artificially created in the Central Pro- 
vinces in order to fix the revenue responsibility on one person on 
the lines of the policy followed in Upper India. This necessitated 
the recognition of sub-proprietary rights for the earlier proprietary 
landlord body, 

(w) In Oudh in some cases the village proprietors were able 
to preserve their independent management, subject to the pay- 
of rent to the over-lord talukdars. Their sub-proprietary 
rights have also been recognized by separate settlement which 
fixes the rent payable to the talukdar, who in their turn pay the 
revenue to the Government in accordance with the main 
settlement. 

The sub-proprietors may themselves be cultivators or they 
niay have tenants to cultivate their lands. 

7* Tenancy Legislation ; Tenancy legislation in India has 
been aiming at securing certain rights to the tenant class. It would 
be more convenient to discuss the problem of tenancy legislation 
according to provinces, since conditions have differed in various 
provinces and the problem has been tackled accordingly. 

(/) Bengal — By the Permanent Settlement of 1793 the land 
revenue was fixed sufficiently high (9/10 of the rental) and was to 
be collected strictly by the zemindar. Though it was intended by 
Lord Cornwallis that the rights of the tenant (who was in many 
cases the original proprietor) would Be secured but it was not 
done until the middle of the 19th century. It was in the year 
1859 that the first Indian Tenancy Law was passed in Bengal — the 
Rent Act of 1859. This was later amended by the Tenancy Act 
of 1885, ‘‘ The Act provides that every ryot who had held any 

in q viljqryo for twelve years, acquires thereby a right. A 

t 1 



SYSTEMS OF LAND TENURE 


87 


der are without right of occupancy. Even the latter, however, 
cannot be ejected except in execution of the decree of a compe- 
tent court, nor can their rents be enhanced at shorter intervals 
than five years. The Act was amended by Bengal Act I of 1907, 
with the object of giving greater facilities to landlords for the 
collection of rent and at the same time cf guarding against 
enhancement of rent by collusive compromises, and removing the 
ambiguities, anomalies and defects brought to light by twenty 
years’ experience of the working of the Act.”^ 

In 1928, another Tenancy Act was passed, according to which 
holdings could be transferred by the tenant subject to the payment 
of a fee, and the landlord was given the right of pre-emption. 
The Act further ‘‘strengthened the right of under-ryots and 
divided them into three classes entitled to different degrees of 
protection.” 

More recently the Bengal Tenancy Act of 1938 was passed 
on April 1 of that year. It caused considerable controversy and 
evoked strong protests from the zemindars who claimed that it 
altered the character of permanent settlement. It abolished 
illegal exactions and cesses charged by the landlord from the 
tenant ; gave the tenant right to recover his diluvial land within 
20 years on payment of four years’ rent, conferred same rights on 
the under-ryot, so far only enjoyed by the occupancy tenants 
and reduced the rate of interest payable on arrears of rent 
to 6;^ per cent, 

(a) United Provinces * — ^The Bengal Act of 1859 was also 
extended to Agra and gave right of occupancy to all tenants 
who had occupied their land continuously for 12 years. The 
Agra Tenancy Act of 1901 provided that a change of holding or 
dispossession for less than a year should not operate as a break in 
this period. The Act also provided that a lease, unless its 
period was at least seven years, could not prevent occupancy 
rights from accruing. This -was to encourage long leases even 
when the landlords did not want tenants to acquire occupancy 
rights. As regards non-occupancy tenants, their rights have also 
been protected. If their rents were enhanced they could hold 
land on those rents for at least five years. The Act of 1901 was 
amended in 1926 with the result that non-occupaacy tenants 
obtained life tenure and in return the landlords got extension of 
their sir rights. 

Under the Congress Ministry, the United Provinces Tenancy 
Act was passed by the Legislature in October, 1939, and received 


1. Moral and Material Progress Report, 1913. 



88 ECONOMICS OF INDIA AND PAKISTAN 

the Governor’s assent in December of the same year. This Act 
followed the lines of recommendations of a committee appointed 
earlier to investigate the problem of land tenure in the province. 
The main provisions of the Act were as follows : (a) It con- 

ferred hereditary rights on all, but a few, of such tenants as 
were not enjoying occupancy rights before, (b) It restricted the 
grant of sir rights to small holders and limited the area (to 50 
acres) in the case of large holders, (c) The Act put restrictions 
on the increase of rents. The prevailing rates of rent were to be 
reduced within five years to the level of those existing between 
1895 and 1905. Once fixed the rents were not to be revised for 
a period of 20 years, (d) The Act also provided for remission or 
suspension of rents during periods of natural or economic 
calamity, (e) Ejectments were allowed only in the case of 
prolonged default and the rate of interest on arrears was reduced 
to 6i per cent. 

The Act met with great opposition from the landlords. 

On) Central Provinces. — Even before the passage of the 
Central Provinces Tenancy Bill of 1939 by the Congress Ministry, 
the position of the tenants in that province was much stronger 
than elsewhere. The Government determined at each settlement 
not only the amount of land revenue but also the rent that the 
landlord had to receive from his tenants. The rights of 
absolute occupancy ” was heritable and transferable (with 
pre-emption on the part of the landlord) and included fixity of 
rent for the term of the settlement. The rent of the tenants-at- 
will could be enhanced by a revenue officer but at an interval of 
not less than ten years. The Act of 1939 among other things 
sought to confer on all occupancy tenants the right to transfer 
their holding. 

(iv) Punjab . — In the Punjab in 1936-37 only 42 per cent of the 
land was cultivated by peasant proprietors. Of the rest 8 per 
cent was held by occupancy tenants and 50 per cent by the 
tenants-at-wilL Rights of occupancy are recognized on historical 
grounds. The Punjab Act of 1887 defines occupancy tenants as 
those who, for two generations, have paid neither rent nor 
services to the proprietor, but only their share of Government 
assessment,” 

The occupancy tenant in the Punjab enjoys extensive rights. 
He can hold land permanently so long he pays the rent fixed by 
authority. He can pass this land on to his descendants on the 
same terms. In fact he is more than a mete permanent tenant. 



SYSTEMS OF LAND’ TENURE 


89 


owner. In practice the only difference between him and the 
owner is that he has to pay a small sum to the latter who is 
theoretically responsible for the payment of Land Revenue to the 
State, 

As regards tenants-at-will, recent village surveys show that the 
area under tenancy is increasing. In 1 891-92, about 36 per cent of 
the total cultivated area of the province was worked by tenants- 
at-will. By 1936-37 this percentage had risen to 49. Increase in 
tenancy has depressed the standard of living of tenants. There 
is also a marked tendency towards the substitution of “ batai 
rents for cash rents. The latter is attributed to greater security 
of agriculture due to extension of irrigation, combined with 
pressure on land. Under such conditions, it is to the advantage 
of the landlord to demand payment in kind (one half of gross 
produce) and the tenant has no alternative but to agree. Batai 
rents, however, are very hard on the tenant. It has been 
calculated that while cash rents in England form about 20 per 
cent of the gross produce, batai rent in the Punjab comes to 
about 45 per cent. '' The latter is a rack rent, ’’ says Calvert, ‘‘ as 
on the whole the demand for land from tenants is greater than 
the demand by landlords for tenants.”^ ‘‘Under the batai 
system,” says another authority, “ which is largely in vogue in the 
Punjab, the produce rent which the tenant pays often trenches 
upon his standard of living.” 

The tenants' at-wiir in the Punjab ‘enjoy no legal protection 
against enhancement of rent and ejectment. “ The extension of 
the period of tenancy beyond eight years,” according to Dr. 
Mukerjee, “is quite rare, and, generally speaking, those tenants- 
at-will who cultivate small areas are replaced at quick intervals.”^ 
“The Tenancy Act allows a tenant-at-will to make an improve- 
ment with the assent of his landlord,” says Calvert, “ if he can 
prove this assent he cannot be ejected, and his rent cannot be 
enhanced until he has received compensation for his improve- 
ment. But local conditions make it very difficult to prove 
assent.”*^ In actual fact, therefore, he gets no compensation for 
improvements. . He has no claim to the residual value of manure. 
Moreover there are harsh rules of distraint in the case of 
non-payment of rent, 

1. Caivert, op. cic-, p. 199. 

2. Mukerjee, R., Economic Problems of India^ Vol I, p. 236. 

3. Ibid. 

4. Calvert, op. cit., p. 200, Footnote. 



90 


ECONOMICS OF INDIA AND PAKISTAN 


(v) Madras . — In the Zemindari areas of Madras the rights of 
the tenants are protected by the Madras Estates Land Act of 
1909, which replaced the old Rent Recovery Act of 1865. “The 
main principle of the Act is that every cultivator, admitted by 
the landholder to the cultivation of the estate lands, has the 
status of an occupancy ryot who is protected against eviction so 
long as he continues to pay the prescribed rates of rent. Enhance- 
ment of rent is allowed only on certain clearly defined grounds 
and a non-occupancy tenant also may acquire occupancy right, 
under certain conditions/’^ The Congress Ministry in 1939 
sponsored a bill to amend this law. The aim of the new bill was 
to declare the right of the ryot to the soil and the standing crops 
of the zemindar, and to make the rent payable to the zemindar, 
unalterable. The zemindars interpreted it as expropriation with- 
out compensation and the bill did not reach the Statute Book. 

In the ryotwari areas of Madras the ryot or occupant 
possesses full proprietary right. He can sub-let the land to 
tenants. The tenant here is absolutely unprotected and has 
almost the status of a farm labourer, “ Sub-letting is generally on 
a partnership basis ; seeds, cattle and implements are usually 
supplied by the landlord who obtains 40 to 60 per cent of the 
yield/’^ The tenant ekes out a precarious subsistence on such 
terms, according to the Banking Enquiry Committee. 

(vi) Bombay , — Until recently there was no tenancy law in 
Bombay. Tenancy was generally governed by customary law. 
The need for legislation, however, was felt for some years and it 
was the Congress Ministry which took the pioneer step and 
passed the Bombay Tenancy Act in October, 1939. The Act 
received the Governor-Generars assent in April, 1940, and came 
into force in certain selected areas in 1941. The main provisions 
of this Act are given below ; 

(a) A new class of “ protected tenants ” is created, and provi- 
sion is made for their protection from eviction, provided they 
held land for at least six years immediately preceding January 1st, 
1938, and have personally cultivated such land during this period. 
Tenants evicted after April 1st, 1937, are to be considered 
protected tenants under certain conditions, 

(b) The security of tenure is subject to certain conditions like 
the desire of the landlord to cultivate land himself, to use it for 
non-agricultural purposes, failure of tenant to pay rent, sub-letting 

1. Kale, op. cit., p. 792. 

2, Mukerjee, op. cit., p. 234. 



SYSTEMS OF LAND TENURE 


91 


by tenant, etc. But if ejected, the tenant is entitled to compen- 
sation for improvements made on the land. 

(c) The Act provides for procedure by which the reasonable 
rent payable by a protected tenant (in the absence of an agree- 
ment) is to be determined. 

(d) Certain benefits are conferred on all classes of tenants. 
Penalties are provided for various exactions by landlord other 
than the rent lawfully due. In some areas the Government can 
fix maximum rates of rent. It is also provided that when 
Government suspends or remits land revenue, rent should also be 
suspended or remitted except in the case of crop share rents. 
Tenants are entitled to the produce and wood of trees planted 
by them during the period of tenancy and compensation for 
such trees, if ejected. 

(e) Clause 23 provides that no agricultural lease is to be made 
for less than ten years. This is to encourage tenants to improve 
the land and benefit from such improvements. 

(vti) Bihar and Orissa , — Let us take these two provinces 
together since they were originally one. Though an enactment 
in 1934 made illegal the imposition of heavy exactions (salamis 
and ahwabs) on the tenants in Bihar and Orissa, they were still 
exacted. These were specially vexatious in Orissa, where tempo- 
rarily settled estates were the rule and permanently settled estates 
the exception. Soon after the Congress came into power in 
these two provinces, they sponsored new tenancy measures. The 
Bihar Tenancy Act was passed in 1938. Its main provisions 
were : It gave absolute right of transfer to the ryot of his 
holding, made levy of abwab an offence punishable with impri- 
sonment, reduced interest on all arrears on rent to 6^' per cent, 
and disallowed all enhancements of rent except those made on 
ground of improvements effected by landlords. 

The Madras Estates Land (Orissa Amendment) Bill was passed 
by the Legislature in the teeth of landlords’ opposition but it 
failed to secure the assent of the Governor' General. The Orissa 
Tenancy Amendment Bill was passed in May, 1938. This also 
raised a storm of protest. This measure gave right of transfer to 
occupancy tenants and of making use of trees grown on their 
holdings and provided heavy penalties on landlords imposing 
illegal exactions. 

Thus it will appear, that the necessity of giving the tiller of 
the soil security of tenure and saving him from unreasonable 



92 


ECONOMICS OF INDIA AND PAKISTAN 


burdens of rent and other charges is gradually being recognised 
all over the country. By such methods the evils of absentee 
landlordism can be met to some extent and agricultural develop- 
ment secured under the system of tenant farming* But why 
take tenant farming as something that is given as a permanent 
fact ? 

8. Land Tenure in Relation to Agricultural Progress : 

Which of the systems of land tenure is best from the point of 
view of agricultural progress and productivity ? It is difficult to 
give a positive answer to this question which will be true under 
every circumstance. Experience in different countries leads to 
different conclusions. The most generally prevalent view is that 
the owner cultivator produces the best results. Give a man the 
secure possession of a bleak rock/’ wrote Arthur Young, the 
English traveller, “ and he will turn it into a garden ; give him a 
nine years’ lease of a garden and he will convert it into a desert.” 
In Denmark it was found that tenancy led to indifferent cultiva- 
tion. This led to a scheme which created a large number of 
contented and prosperous small holders. Speaking about the 
tenant cultivation in the Punjab, Calvert wrote ; “ They gene- 

rally take less care in preparing the crops, plough it less often, 
manure it less and use fewer implements upon it than owners. 
They grow less valuable crops, especially avoiding those requiring 
the sinking of capital in the land ; they make little or no effort of 
improving their fields ; they often keep a lower type of cattle ; 
they avoid perennials and bestow no care on trees.”*^ At 
another place he gives his conclusion : “ On the whole it 

would appear that the best cultivation is done by the self-cultivat- 
ing owner or occupancy tenant, next by the share-tenant, and 
worst by the hired labourer.”^ 

The “ batai” system prevailing in the Punjab under which 
the rent is paid in kind (4 of the gross produce as a rule) does not 
conduce to good cultivation. This is as one would expect. 
“ When the cultivator,” says Marshall, “ has to give to his 
landlord half of the return to each dose of capital and labour 
that he applies to the land, it will not be to his interest to apply 
any dose the total return from which is less than twice enough 
to reward him.”^ Batai .rents are, however, justified by some 
people oh the ground that they secure automatic adjustment of 
rent to prices, and hence conduce to good relations between the 


1. Wealth and Welfare of Punjab, p, 206-07. 

2. Ibid., p. 203. 

3. Marshall, Principles oj Economics, p. 644. 



SYSTEMS OF LA-ND TENURE 


93 


tenants and landlords, and develop mutual interest between the 
two. “ But these advantages are purchased at too high a price.”^ 

Tenancy, however, is not to be condemned under every 
circumstance. The best agriculture in the world is carried on 
under the tenancy system'*^ (England).” This is because ‘‘an 
English landlord is his tenants’ best friend and spends fully one^ 
third of his rental back on the land and its needs ; most Punjab 
landlords levy double the rent an English landlord would do and 
spend practically nothing back on the land.”"' 

It is not, therefore, merely the system of land tenure which 
is the deciding factor under such conditions. The character of 
the tenant and of the landlord must equally be taken into con- 
sideration. When the tenant is easily ejected or no compensation 
is paid for the improvement which he might have brought about 
in his land, and the landlord is merely interested in receiving his 
rent, cultivation is bound to be indifferent. But when the 
tenant enjoys security of occupation, and law provides for com- 
pensation for improvement brought about by him in the land and 
further the landlord invests capital in the land, tenant farming 
can show as good results as any farming. In fact it can produce 
better results since the landlords’ capital resources are much 
greater than those of a small peasant proprietor. But if the 
choice is between a peasant proprietor and an absentee landlord, 
who is a mere paraisite, the former is to be preferred. 

9. New Lines of Reform *. But are these the only two 
alternatives ? Russian experiment has shown that neither the 
tenant nor the small peasant proprietor is the best agency through 
which the nations’ land may be properly exploited. Two more 
alternatives are far more efficient, (a) Nationalization of land and 
its exploitation on the principles of collective farming. Here the 
land belongs to the state and cultivators work on it with the 
help of equipment supplied by the Government and receive their 
wages, (b) Small peasants may own land but may work under the 
management of a Co-operative Society. In this way they will 
receive payment as owners of land, as owners of capital if any, 
and as workers for their work. Since desire for ownership is an 
ingrained sentiment in India (especially in the Punjab) Co- 
operative farming has greater scope here. But large estates may 
be nationalized (with compensation to the present owners) and 
may be worked by the present tenants as collective farms. 'The 


L Calvert, op. cit., p. 198. 

2. Carver, Principles of Rural Economics ^ p. 126* 

3. Calvert, op cit., p. 298. 



94 


ECONOMICS OF INDIA AND PAKISTAN 


absentee landlord in any case must disappear. In the words of 

the Floud Commission, he has become an incubus on the 
working agricultural population, which finds no justification in 
the performance of any material service, so far as agricultural 
improvements are concerned, and fails to provide for any effective 
means for the development of the resources of the land,”^ 

The small peasant proprietor also is an anachronism since he 
cannot carry on agriculture on modern scientific lines. “ The 
economic future of land is with collective farms and garden 
cities ’’ says Bernard Shaw, and no person whose notion of land 
reform is to turn all the crude agricultural estates into little 
peasant properties. . . should be allowed to meddle with politics 
in any capacity.’ 

Of course, the landlord class will resist any change in the 
direction of nationalization of land for purposes of collective 
farming. Recently the Government of India wrote to provinces 
regarding the undertaking of an inquiry into the systems of land 
tenure. The attitude of several of them was that they did not 
wish to take up .such an inquiry at the present time as the only 
result might be to embitter relations between landlords and 
tenants.^ 

Such being the case, for the present, the Government might 
carry on experiments in collective farming and co-operative farm- 
ing on land still under Government control, in order to see 
which of the systems produces best resutls. If the Government 
cannot manage such schemes, private capitalists may be encouraged 
to undertake them to start with. 


1. Repoft, p. 37. 

Z* Shaw, G.B., Evetybodfi Political Whatk Whatt 



CHAPTER V 


THE AGRICULTURIST AND HIS EQUIPMENT 

1. Introduction : After considering the legal position of 
the cultivator with respect to the land he cultivates, we come to 
the study of the equipment at his disposal for the exploitation of 
his land. This involves the study of the size and character of 
his holding, the implements, the seeds and manures used by him, 
the type of livestock possessed by him, the irrigational facilities 
within his reach and, finally, his personal equipment as an agricul- 
turist worker and enterpriser. 

2. The Holding: The most obvious fact about the holding 
of an average cultivator is that it is small in size and is not found 
in a compact block at one place, but is scattered about in tiny bits 
all over the village area. Holdings may be viewed from two 
points of view : from the point of view of ownership and that of 
cultivation. The ownership holding or proprietary holding may 
be quite large, but it may be distributed among a number of 
tenant cultivators, thus making the size of the unit of cultivation 
small. Conversely, a large number of small owners’ holdings may 
be cultivated by a few tenants, thus making the cultivator’s hold- 
ing large. Where the owner is himself the cultivator of his 
holding, the ownership and cultivation units coincide unless, of 
course, he rents a part of his holding to others or hires on rent 
more land from other owners* From the point of view of 
agricultural productivity, it is the size of the cultivation holding 
tnat matters most. It should be of an '‘economic ” size. 

3. Economic Holding : What is an economic holding ? It 
is not easy to give a satisfactory answer to this question. The 
size of a holding which would be called economic will vary with 
a large number of circumstances. For instance, it will depend 
upon: (a) The methods of production used with mechanical 
methods of agriculture, such a size may be 200 acres or more, 
while with primitive methods as they prevail in India, even a 
holding of ^0 acres may be too large to be economic. 

(b) The kind of agricultural production. — ^For the production 
of wool and wheat the size of the holding has to be large to 
give best results. For vegetable and fruit production the size 
required will be comparatively small. 



96 


ECONOMICS OF INDIA AND PAKISTAN 


(c) The productivity of the soil.— When the soil is good, a 
small area may be adequate to support a family in comfort ; when 
the soil is inferior or lacks proper irrigational facilities, a larger 
area may be necessary. For instance, 6 acres in Jullundur 
district of the Punjab may give a higher standard of living to a 
family of five than, say, 15 acres in Attock district. 

(d) The way agricultural operations are organised. — For in- 
stance, if farming is carried on co-operatively by a number of 
families, a large size of a holding may produce best results, while, 
if it is carried on individually, a small size may be good enough. 
This is partly because under co-operative farming more scientific 
methods can be profitably applied. 

But if the size of the family and the character of their 
equipment is already given, the size of the holding, which should 
be called economic, will be such as would give them a reasonably 
decent standard of living. Such a holding varies in different 
parts of India according to the character of the soil, rainfall and 
other facilities for irrigation and marketing. 

Some writers have given their view about an economic 
holding in India on the basis of their investigations in particular 
localities. A few of these m.ay be noted. Dr. H. Mann defines 
an economic holding as one which will “ provide an average family 
with the minimuni standard of life considered satisfactory.”^ He 
puts the size of such a holding at 20 acres. According to Keatings, 
an economic holding should allow a man a chance of producing 
sufficient to support himself and his family in reasonable comfort 
after paying his necessary expenses.^ He puts such a holding in 
the Deccan at 40 to 50 acres of fair land in one block with at least 
one good irrigation well. According to Sir Vijayaraghavacharya, 
“ from 4 to 6 acres is the minimum subsistence family holding.” 
Of course, the size, he agrees, will differ with differences in soil, 
productivity, water supply, crop rotation and agricultural practice. 

4, The Size of an Indian Owner’s Holding ; Whatever 
definition of an economic holding may be adopted, it is regret- 
table that in India by far the largest number of holdings, whether 
cultivation or proprietary, are of a size which could hardly be. 
called ' economic.'* To take the Punjab first, some years ago, Mr. 


1. Land and Labour in a Deccan Village, Vol II, p# 43,. 

2. Rural Economy in the Bombay Deccan, pp. 52-53* 

3. “ The average area held by each right holder (in India) is small, and there ■ 
are a very large number of such holdings under two or three acres.” Report of 
Agricultural Commission, p. 143. 



TSE AGRICULTURIST* AND HIS EQUIPMENT 


97 


(a) About 40‘4 par cent of the owners own from one to less 
than five acres, the land involved being 11 per cent of .the 
whole* ^ ' * 

(Hi) About 267 per cent of the owners possess* from five to 
less than 15 acres, the land being 26*6 per cent of the whole* ' 

(tv) About 11*8 per cent own from 15 to less than 50 acres, 
the land being 35*6 per cent of the whole* 

(v) About 3*7 per cent possess 50 and more acres and own, at 
a rather rough estimate, 25*7 per cent of the land*^* 

“The average cultivated area per owner in the Punjab is 
between seven and eight acres*’^^ The holdings in the other 
provinces are still smaller. In Bengal, 46 per cent of the farmers 
have holdings below two acres each, while another 21 per cent 
have two to four acres each**^ The average size varies from two 
to three acres in Madras to half an acre in Bihar and Orissa. In 
the United Provinces it is two and a half and in Assam it is 
barely three* According to Dr* Mann, the average size of the 
holding in Pimpla Soudagar (a village in the Poona district) was as 
much as 40 acres in 1771 ; by 1915 it had been reduced to only 7 
acres. “81 per cent of these holdings,” says Mann, “are under 10 
acres in size while no less than 60 per cent are less than five acres.” 

As already noted, the size of cultivation is more significant 
than the size of ownership* Many of the holdings below one acre 
in the Punjab, for instance, belong to non^agriculturists and are 
cultivated . along with other areas. On the other hand, most of 
the large holdings are parcelled out by the owners to tenants, 
each cultivating comparatively small areas* What then is the 
position as regards the size of cultivation 1 

5. Size of Cultivation : In another inquiry Carried out by 
Mr. Calvert into the size and distribution of cultivators' holdings, 
he found that in the Punjab (0 22. par cent of cultivators 
cultivated one acre or less each ; (rO a further 33 par cent of 
cultivators cultivated from I to ,5 acres each; {Hi) a further 
31*9 per cent of cultivators cultivated from 5 to 15 acres each ; 
(rV) a further 12*6 par cent of*^ cultivators cultivated from 


1. Calvert : op. cir., pp. 172-73. 

2. Ibid,, p. 172. 

3. Report, Bengal Lani Revenue Commission^ Voi. 11, p. 114*^115.. 



98 ECONOMICS OF INDIA AND PAKISTAN 

15 to 50 acres each ; and (v) only one per cent cultivated over 
50 acres each. 

Comparing the results of his two inquiries, Mr. Calvert 
concludes ; “ There appears to be about 500,000 ownerless culti- 
vators,' a real tenant class ; the number with one acre or less is 
disconcertingly great ; numerous small owners in the 1 to 5-acre 
group have managed to get enough land on rent to take them out of 
this group into one higher up ; once the 15-acre holding is passed 
the number dwindles sharply. As the size of a holding considered 
cultivable by one yoke of oxen is about 14 acres, it is clear that 
very many have failed to increase their holding to this size, so 
that there is a real demand for land on rent, a fact which 
accounts for the high rents and the ability of the landlord to 
exact a fifty per cent share instead of a reasonable cash rent.”^ 
Thus the majority of the holdings in the Punjab are below the 
economic level. 

In the table below are given the number of cultitvaed acres 
per farmer and the average size of holdings in 1931. The table 
reflects conditions among permanent right-holders. The actual 
position is worse because many of the smallest cultivators cultivate 
extremely tiny fields. 


Province 

Per cultivator 

Average size 


cultivated 

of holding. 


Acres. 

Acres. 

Bombay 

16-8 

ir? 

C. P. 

200 

8-5 

Punjab 

8-8 

7*2 

Madras 

5*9 

4*5 

Bengal 

3*9 

2*4 

Assam 

3*4 

About 2*0 

U.P. 

3-3 

6*0 

Bihar 

Orissa > 

2*9 

Between 4 and 5 

Sind 

••• 

38*7 


Compare with these figures the averages per cultivator relating 
to some other countries 


Belgium 


... 

5*7 

France 

... 

.r.. 

15*5 

Germany 


• r. 

19 25 

England 

... 

... 

26*95 

Scotland 

... 

... 

56*31 

Wales 

... 

• •• 

38'05 

U. S. A. 



1400 


1. Calvett, op; cit, p. I 



THE AGRICULTURIST AND HIS EQUIPMENT 99 

In Japan the average holding is about 2i acres and in Egypt it 
is about the same size. It should be remembered, however, that 
while in India intensive methods of cultivation are ati exception, 
the size of the holding is comparatively small. In Japan, Belgium 
and Denmark small holdings are accompanied by highly intensive 
cultivation. Even in India where holdings are extra small (e.g., 
Bengal, Assam and U.P.) it is the intensive rice cultivation that 
makes it possible for the cultivator to support a family on his tiny 
holding. Inequality of the averages is also due to the differences 
in the quality of the soil and rainfall. 

6. Fragmentation of Holdings : Sub-division of holdings 
mean the small size of the total area held or cultivated. Fragmen- 
tation implies the scatterred character of this area into small 
pieces all over the village area. Though usually fragmentation of 
ownership also means fragmentation of cultivation, this need not 
be always the case. A cultivator may take on rent a block of land 
consisting of several plots belonging to different owners. On the 
other hand, a consolidated owners’ holding may be let on rent to 
different tenants in fragmented pieces. From the economic point 
of view consolidation of cultivation is more important than 
consolidation of ownership unless, however, the owner is himself 
the cultivtor as is mostly the case in the Punjab. 

Fragmentation is normally caused at the time of sub-division 
of property among several owners each of whom wants to get a 
portion of each of the ancestral pieces. Fragmentation of culti- 
vation is, therefore, the result of the fragmentation of owner- 
ship. A few examples will give some idea of the extent of 
fragmentation existing in India. In the village of Pimpla Sauda- 
gar, Dr. Mann found that 156 owners owned between them 729 
plots of which 463 were less than 1 acre, and 211 less than a 
quarter of an acre. In Ratnagiri, the size of individual plots is 
sometimes as small as 0*00625 of an acre. In the Punjab, some 
fields have been found which were a mile long and a few yards 
wide, and others so small that it was not possible to cultivate 
them. As regards fragmentation of cultivation in the Punjab 
village of Bairampore, Mr. Bhalla found that 34 4 per cent of the 
cultivators had over 25 fragments each* In Pimpla Saud^ar 62 
per cent of the plots were found to be less than one acre in area 
and in Jategaon there were 31 per cent of such plots.^ 

7, Causes of Sub.Division and Fragmentation : The main 
causes which have led to the small size of holding and of indivi- 
dual plots are given below 


1. ' Report, Royal Commission on Agriculture, p. 134-35. 



100 


ECONOMICS OF INDIA AND PAKISTAN 


(l) Grotvih of Population^ — As the population grows and the 
area under cultivation does not increase proportionately, land gets 
divided among larger and larger numbers of people and thus the 
size of an average holding decreases, 

(a) Laws of Inheritance. — Both the Hindu and the Muslim laws 
of inheritance favour partition of landed property in equal shares 
amongst the heirs. At the time of division, it is usual for the 
heirs to demand a piece from each quality of land. Thus with 
sub-division of holdings also occurs fragmentation. 

(///) Decay of handicrafts due to foreign competition has 
also increased pressure on land, especially when there has been 
no corresponding industrial development of the modern type to 
take away the surplus population from land. 

(iv) Attachment to the Landed Property. — In India, the sentiment 
iti favour of landed property is great. It is a source of prestige 
and the land-owner docs not sell out his land easily, even when 
he can seek his fortune in the towns. Thus everyone sticks to his 
little share of property and thus helps sub-division and frag- 
mentation. 

(v) The advent of the British rule, by establishing peace and 
security and definite rights in land, has also encouraged invest- 
ment in landed property on the part of money-lending and other 
middle classes. 

(vO Agricultural indebtedness has also acted in the same 
direction. Frequent divisions of landed property have been caused 
by the chronic state of indebtedness of the peasantry. 

(vii) Breakdown of the joint family system and the growth of 
the spirit of individualism has made joint farming an exception 
and partition the rule. . 

The main cause, however, is the increase in population un- 
accompanied by adequate expansion of the alternative avenues of 
employment. 

8. Evils of Sub-Division and Fragmentation : The sub- 
division of holdings is sometimes justified on the ground that it 
gives equal chances to all the heirs of landed property and pre- 
vents the creation of a class of landless labourers and thus 
conduces to economic and social stability. Similarly, fragmenta- 
tion of property is defended on the ground that it gives insurance 
against vagaries of seasons by enabling the cultivator to sow his 
crops on different soils and in different localities. Moreover, it 
makes possible a more elaborate rotation of crops. But the evils 



HHE AGiUCULTUEIST AND HTS EQUIPMENT 101 


of small and fragmentary holdings are much greater than any 
advantage that may accrue from such holdings* Certain evils are 
common to both sub-division and fragmentation and. others are 
peculiar to fragmentation only. 

Sub-division and fragmentation are wasteful and are a.serious 
obstacle in the way of agricultural improvement. 

In the first place, under such conditions even the poor equip- 
ment possessed by the Indian cultivator cannot be used to the 
best advantage. The holding is too small to get the best results 
from such equipment. 

Secondly, it makes scientific cultivation, like digging of wells, 
employment of labour-saving devices, introduction of mork 
valuable crops and large-scale production, an impossibility. 

Thirdly, the standing charges being the same on a small farm, 
the cost of production per unit of produce is higher than on a 
large farm. For instance, fencing charges per acre on a small and 
fragmented holding arc higher. 

Fourthly, initiative and enterprise are discouraged due to 
difficulties of protection of the crops from weeds, animals and 
humans and also due to the necessity of following the crowd in 
rotation of crops, etc. Independent well-digging is not possible. 

Fifthly, much area is wasted in hedges and paths. 

Apart from these, there are further evils of fragmentation alone. 
There is considerable waste of time, energy, produce and manure 
when' the plots lie scattered about over a big area. Some plots are 
so. small that it is not worthwhile cultivating, them and thus 
there is waste of land. Moreover, disputes about boundaries, 
rights of passage for man, beast and water are a common feature 
of village life and cause waste of time, money and energy of the 
cultivator. 

9. Proposed Remedies ; Various remedies have been pro- 
posed to meet the evils of sub-division and fragmentation. There 
are remedies which involve the enlargement of small and un- 
economic holdings and consolidation of already fragmented hold- 
ings. Then there are suggestions for prevention of further sub- 
division and fragmentation of holdings. These remedies are 
detailed below 

(0 Creation of Eccnomic Holdings . — ^This may be done either 
(d) by socialization’ of all land and then its redistribution among 
the peasants in blocks large enough for economic exploitation. 
This remedy is too drastic for India and will require the reorgani- 



102 


ECONOMICS OF INDIA AND PAKISTAN 


zatipn of our whole economic life which is not practicable under 
the present conditions. 

(b) Individual landed property may be pooled for the pur-- 
poses of cultivation on the co-operative farming principle while 
keeping private property in land intact. This method has some 
scope in India but has not been tried due to several practical 
diiEculties of management and psychology of the people. 

(c) In Italy money is advanced and old mortgages are taken 
over by the State in order to promote the formations of economic 
holdings. Since the number of uneconomic holdings is very 
large and the sentiment in favour of ownership strong in India, 
this methcd will be beyond the finances and power of the State. 
The State, however, can help in relieving pressure on land by 
creating alternative avenues of employment through a policy of 
planned industrialization. 

(it) Preservation of E_conomic Ho/d/ng5.~Another and compara- 
tively more practicable method is not to allow holdings that are 
economic to become sub-divided into uneconomic ones. This 
may be done in several ways : — 

(a) By changing the laws of inheritance which promote sub- 
division and substituting, for instance, the law of -primogeniture 
by which landed property' will pass on to the eldest son. This 
method will create economic and social difficulties. Arrangements 
will have to be made for the support of the younger sons for 
whom avenues of employment ate extremely restricted in this 
country. This might lead to the creation of a large landless class 
which will be a danger to social and political stability. Moreover, 
Hindu and Muslim religious sentiment will not allow the change 
of laws of inheritance. 

(b) By making a holding indivisible after it has reached a 
certain size to preserve its economic character. Egypt has passed 
the Five Fedden Laws to check sub-division beyond the size of an 
economic holding. “ Although the land ' is nominally divided 
amongst' the heirs, it is actually left in the hands of one to 
cultivate on behalf of the whole number or may be handed to 
trustees to manage for all.’’^ Mr. Keatinge suggested giving to the 
right-holders in an economic holding power to register it as such 
in the name of one right-holder, after which the holding became 
impartible and not liable to further sub-division. In fact, a Bill 
was drafted in Madras, which was to be a permissive measure, to 
put this scheme into effect, , A similar Bill was introduced in the 


1. Agticultaral Cbmnus^ion Report, p. 138. 



THE AGRICULTURIST AND HIS EQUIPMENT 103 


Bombay Legislature which aimed at stopping further sub-division 
cf holdings and consolidation of existing small holdings for profit- 
able cultivation* But these measures met with criticism and 
-opposition and could not pass the Legislatures. The main points 
of criticism were that such measures would defy the social system 
of Hindus and Muslims, would create a landless class, reduce 
agriculturists’ credit and would create complications in revenue 
records* Moreover, the difficulty of defining an economic holding 
suited to varying conditions was also pointed out* 

(c) In the Punjab canal colonies, sub-division has been 
checked by restrictions on alienations, and in the case of certain 
grants by the limitation of succession to a single heir ; so far as 
right-holders are concerned, the policy has proved successful, but 
it has not served to prevent joint cultivation or even sub-division 
of cultivation ; the single heir, when the elder brother, is not in a 
position to refuse livelihood to his younger brothers, even though 
he cannot give legal rights in land.”^ There is no doubt, how- 
ever, that restrictions on alienation have the effect of preventing 
sub-division. “ It needs no argument to show,” wrote the Agri- 
culture Commission, “ that if the five million acres which the 
non-auriculturists in the Punjab have acquired in the last eighty 
years had remained in the hands of the original owners, the 
average holding would be much higher than it is.”^ 

Thus it appears that prevention of sub-division and creation 
of economic holdings in India are fraught with many practical 
difficulties. The remedies available are too drastic to suit the 
present circumstances. 

In the cas,^ of fragmentation, however, that evil can be met 
much more easily. 

It). Consolidation of Holdings : '‘The only measure that 
appears to promise relief,” wrote the Royal Commission on 
Agriculture, " from the evils that arise from fragmentation of 
right-holders’ holdings is the process which is generally known as 
the consolidation of holdings, though it is in reality, the substitu- 
tion — by exchange of land — ^of a compact block for a number of 
scattered fragments. By this process, all the land of o|^e holder 
may be formed into one plot only, or in a few plots of different 
kinds of soiL”^ 

The work of consolidation was started first in the Punjab as 
far back as ,1920-21. By July 1937, 791,358 acres had been coti- 

1. Report, Royal Cofiatnission on Agriculture, p. i36. 

2. Ibid. 

3. Ibid,, p. 138. 



;104 


ECONOMICS OF INDIA AND PAKISTAN 


sloidated out of tlie total cultivated area of 30,000,060 acres. 
Originally, the work was done on voluntary basis/ The Oonsolida-' 
tion of Holdings Act, 1936, however, allowed compulsion to be 
used if a stubborn minority stood in the way* By the middle of 
1939, there were in the Punjab 1,477 co-operative consolidation of 
holdings societies* By the end of October 1941, the total con- 
solidated area amounted to about 1,300,000 acres. Consolidation 
of holdings have brought many advantages. Arable area has 
increased and so has its productivity. There is greater desire for 
improvement among the owners. Occasions for litigation have 
decreased. It may, however, be pointed out that in the case of 
the Punjab, consolidation is facilitated by comparative homogen- 
eity of soil and by simplicity of tenure,”^ According to the 
Floud Commission, two causes have favoured consolidation in the 
Punjab: (/) crops depend entirely on irrigation so that the peasant 
whose plots are consolidated is in a position to sink a well, and 
(WJ that there is very, little subinfeudation in the Punjab. 

TheTead of the Punjab was followed by other provinces, 
notably the Central Provinces and Berar, the United Provinces 
and, among the States, Baroda. In 1939-40, there were 182 Co- 
operative Consolidation Societies in the United Provinces and 
they had consolidated by that time 77,672 pucca bighas of land, 
A Consolidation of Holdings Act was passed in 1939 under which 
consolidation is being carried on as in the Punjab, side by side 
with the work done by co-operative societies. In Madras, in 
1939-40, there were only 22 societies for consolidation. A beginn- 
ing, however, has been made. In the Baroda State, useful work 
has been done by consolidation societies, whose number in 1939- 
'40 was 79.' 

The work done in the Central Provinces , deserves greater 
attention. ■ There, some work had been' done by co-operative 
societies ’on voluntary basis. But in 1928, the Consolidation of 
Holdings Act was passed which introduced an element of com- 
■ pulsion.' .In the first instance, the, Act- was ^ applied ■ to the 
Chhattisgarh Division only* Under it,* compulsion could be 
exercised on the rest if one-half of the right-holders, owning not 
less than one-third of the occupied -village* area, declared them- 
selves in* favour of consolidation. Under this' Act 'about 500,000 
acres have already been consolidated. * 

The Bombay Small Holdings Bill was introduced into the 
Legislative Council iri 1927. Its object » was to stop further sub- 
division of holdings and to create “ profitable holdings! ’'—which 

i. Royal Commission Report, p, 139. 



THE AGRICULTURIST AND HiS EQUIPMENT 105 

could be profitably cultivated ~^and to promote consolidation* On 
ac^unt of strong opposition in the Council and outside, the Bill 
had to be indefinitely postponed and never became an Act. 

No practical scheme of consolidation has been evolved in 
BerigaL The Floud Commission was of the view that, although 
desirable, consolidation would involve great practical difiiculties. 

action/’ wrote the Royal Commission on Agricuture, 
in tavour of consolidation, where it is introduced under a 
permissive Act, should be taken in a guarded manner. Special 
areas should be selected for notification and full inquiry should 
be made into the opinions of the right-'holders before any measure 
of compulsion is enforced. . . The State should undertake pro- 
paganda work, should explore the actual situation and should also 
bear the cost in early stages/’^ 

Perhaps this policy of caution ” was justified in earlier 
stages when most people were not familiar with the advantages 
of consolidation. We feel that time has come now to make 
consolidation of holdings compulsory in every village except 
when in the opinion of the authorities definite practical difficul- 
ties exist. Merely because the idea does not appeal to most 
of the owners should be no reason to desist from this necessary 
reform. Of course, before compulsion is applied, ground should 
be prepared by persuasion and propaganda. 

11, Problems of Indian Soil * We have already seen that 
the size of an economic holding is closely related to the nature 
of the soil. Where soil is fertile a small holding will support a 
family and where it is inferior a much larger area may not do so. 
The fertility of the soil depends upon its physical and chemical 
qualities. Physically, the soil should be firm enough to take hold 
of the roots and soft enough to allow free movement of water. 
Chemically, it should contain a balanced quantity of essential 
salts. 

In a previous chapter we have already studied the main types 
of soils that are found in India. The question is frequently 
asked whether the Indian soil is deteriorating. In 1893, Dr. 
Voelkar in his report held the view that no positive evidence 
was available of soil exhaustion though Settleme'nt Officers 
throughout the country generally held the view that Indian soil 
was getting less productive. In 1928, the Royal Commission on 
Agriculture wrote as follows; — ‘‘ Such experimental data as are at 
our disposal support the view, that when land is cropped year by 
year, and when the cropjs removed and no manure is added 


1. Report, p. 144’* 



106 


ECONOMICS OP INDIA AND PAKISTAN 


Stabilized condition is reached . • . while the paucity of records 
throughout India over any long period of time makes the matter 
impossible of exact proof, we are of opinion that strong pre- 
sumption is that an overwhelming proportion of agricultural 
lands of India long ago reached the condition to which experi- 
mental data point. A balance has been established and no 
further deterioration is likely to take place under existing 
conditions of cultivation.’'^ 

In 1937, Sir John Russell wrote, ‘‘ The acreage under rice is 
apparently declining ... I was on several occasions informed 
that the yields are declining. No good figures seem to be 
available, but if further inquiry indicated any basis for the 
belief, it would be desirable for the Council to arrange for 
sample surveys to be taken in a region where the decline is said 
to be going on in order to obtain definite information in the 
matter.”^ 

In 1939, Rao Bahadur Bal, Agricultural Chemist to Govern- 
ment of C.P. and Berar, expressed the view that the history 
of crop-yields does not indicate any progressive decline in the 
yield per acre during the period 1900-22. But he attributed this 
to the fact that “ the soil has reached a stationary state of 
fertility at a low yield.” ^ 

The Bengal Provincial Banking Enquiry Committee was of 
opinion that in Bengal the fertility of the agricultural land 
is deteriorating.”^ 

Thus the general view is that, although positive data is 
lacking, whatever tests are available show that Indian soils have 
reached almost the lowest stage of deterioration. This appears 
quite a reasonable assumption in view of the fact that very little 
is returned to the , soil in the way of manures while heavy 
cropping is taken year after year. Cow-dung is burnt, bones are 
exported and so ar^ oil seeds to a large degree. Night soil is 
wasted and chemical manures are beyond the pocket tf the 
cultivator. On the other hand pressure of population on land 
favours frequent cropping. 

12. Soil Erosion ; Apart from the question of soil exhaus- 
tion is the deterioration of the soil through the process known as 
soil erosion. Soil erosion implies washing away of the surface 
soil either through river floods or excessive rain in the hills. The 

1. Report, p. 76. 

2. Russell, Report on the work of the Imperial Council of Agricultural 
JResearch, p. 24. 

3. Report, p. 21. 



THE AGRICULTURIST AND HIS EQUIPMENT 107 


rivers might bring cultivated land under its sweep or may throw 
a thick layer of sand over it thus making it unfit for cultivation* 
Surface erosion may also be caused by heavy rains in areas that 
have not been properly protected through the construction 
of embankments* 

The problem of soil erosion has arisen in several provinces of 
India* It is of special importance in the United Provinces and 
Western Bengal where a net work of ravines has been formed 
through this process* Due to heavy rainfall on hill-sides, soil 
erosion has occurred in the southern districts of Bombay 
Province apd Chhota Nagpur. In the Punjab, it is found in the 
sub-montane districts from Hoshiarpur up to Ambala in the East 
and up to the Salt range in the West* From Jhelum this range 
goes up to Talagang tehsil of Attock district* 

In the Hoshiarpur district alone, 100,000 acres of land have 
been rendered unfit for cultivation through soil erosion. In 
Jhelum district, more than 100,000 acres have been spoilt* Either 
the land has been swept away through the action of hill-streams 
or it has been covered with sand through floods. 

Soil erosion is not a peculiarity of India alone* In the U.S.A* 
“something like ll\ millions of acres of land which were once 
cultivated have been destroyed by gullying* In Illinois nine 
million acres which are subject to serious erosion have been 
rendered almost uncultivable.*’^ 

Soil erosion may occur due to several causes: (/) Due to cutting 
of trees or deforestation* In Una tehsil of Hoshiarpur, fine 
trees have been cut by the Zemindars* In Attock and 
Jhelum districts, trees have been removed from the banks of the 
Swan stream and the land has become barren, 00 Due to 
removal of vegetation which exposes land to wind and rain* 
This may be caused by increase of population or number of 
animals* {iii) Uncontrolled grazing, specially by goats* Grazing 
does not let the grass flourish and leads to denundation of the 
soil, {iv) Cultivation on hill slopes also has the same effect, 

. As regards remedies they consist in ; (a) Replanting of trees ; 
(b) Building "of embankments ; (c) Reclamation of land ; and 
(d) Control of Grazing. 

The Punjab Government has created an Anti- Erosion Depart- 
ment to meet this evil. 

Trees cannot be successfully planted unless grazing of cattle, 
sheep and goat is forbidden. A law exists in the Punjab under 

1, Wadia and Merchant, Owr Economic Prohlemj p. 153, 



108 


.ECONOMICS OF INDIA AND PAKISTAN 


which areas can be closed against grazing either partially or 
wholly or seasonally. 

Digging of contour trenches is useful. This consists in 
making of channels on the slopes at small distances. Thus the 
water flow is obstructed; the water gets absorbed in the earth. 
Seeds of grass and trees can be sown in these channels. 

Embankment can be built by the cultivators themselves. 
Thus, water can be prevented from flowing down. This conserv- 
ed water can be used for irrigation. 

Reclamation of land in Chos is being done by the Forest 
Department in the Punjab. 

Protection through planting of shrubs and wild trees by the 
Forest Department was suggested fifty years ago by Dr. Voelker in 
his famous Report. The same was recommended recently (1937) 
by Sir John Russell. He further suggested that protective 
measures be made a State-responsibility^ as against the Royal 
Commission’s suggestion of private co-operative effort.^ 

13. Manure : India can produce almost any kind of crop on 
account of her favourable climate and configuration of the soi^, 
But the Indian soils are deficient in phosphoric acid, nitrogen 
and organic matter. And since the pressure on land has reduefed 
the area kept fallow for reviving fertility, the use of artificial 
manures has become more and more essential, Water and 
manure together,” wrote Dr. Voelker, “represent in brief the 
ryot’s main wants.” The various sources of supply of manures 
are discussed below : — 

(a) Farm-yard Manure . — This consists of cow-dung and the 
urine of cattle. The urine is allowed to go waste without any 
attempt at its collection. The cow-dung is widely used as fuel. 
This is not always due to lack of alternative fuel but to custom 
and prejudice, which should be systematically discouraged. 
Where cow-diing is burnt on account of real lack of fuel 
material, attempts should be made in co-operation with the 
Forest Department to make such fuel accessible to the villager. 
Planting of trees ' along roads and canals and in special village 
preserves, kept for this purpose, can considerably reduce the 
magnitude of the fuel problem. Burning of cotton stalks, dry 
stubble and other sweepings can also help. The villager should 
be instructed in the methods of preserving manure. Mr. Brayne 
did useful work in Gurgaon district of the Punjab in this 

1. Report, p. 57. , 

2. Royal Commission Report, p. 80. 



THE AGRICULTURIST AND HIS EQUIPMENT 109 

connectioti and his suggestions were later popularized in the 
whole of the province (and elsewhere) under the rural recon- 
struction drive. Thousands of pits were dug to preserve manure. 
But it appears that the results obtained under the guidance of 
Mr, Brayne and his staff were only temporary. Unless the 
psychology of the villager is entirely changed by constant propa- 
ganda and education, permanent results will not be forthcoming, 

(b) Composts, — Compost is obtained by causing decomposition 
of all sorts of waste materials, sweepings, leaves and other 
vegetable matter. In China, vast quantities of composts are 
manufactured from the wastes of cattle, horses, pigs and poultry 
combined with herbage, straw and other similar waste.^ Experi- 
ments in preparing composts have been made by agricultural 
departments of provinces like Bengal, Madras and Central 
Provinces The departments, howevet,- have not yet devised a 
practical method which can be used with profit by the ordinary 
cultivator on his land. 

(c) Night Soil, — There is still great prejudice against the use of 
night soil as manure, though it is slowly breaking, especially 
where night soil is available in the form of poudrette. The 
methods of converting night soil into poudrette — in which form 
it is mqch less obnoxious to use — adopted at Nasik have proved 
quite successful and should be used all over the country. 
Co-operation between the agricultural departments and municipal 
authorities can produce profitable results. The sewage process of 
making the night soil into less obnoxious manure is recommend- 
ed for towns where there is a regular sewage system. 

(d) Leguminous Crops and Green Manure, — The Indian agricul- 
turist knows the value of leguminous crops which improve the 
soil, e.g., gram. The agricultural department should discover 
new varieties of such crops and should popularize them. As 
regards green manure, the experiments of the agricultural depart- 
ments have discovered that sann hemp on the whole gives the 
best results. But the trouble is that, when grown, it exhausts so 
much of the moisture in the soil that enough is not left to 
decompose it when it is ploughed in. Crops like dhaincha and 
groundnut, the leaves of which can be used as green manure 
without interfering with the commercial value of crops, are also 
good from this point of view. The area under groundnut 
has considerably increased in recent years. 

(e) Oil Cakes, — By exporting oil-seeds, India loses a valuable 
source of combined nitrogen. If the oil is manufactured in the 
country, the oil cakes can serve as food for the cattle and also as a 

1. Report, Royal Commission on Agriculture, p. 53. 



110 


ECONOMICS OF INDIA AND PAKISTAN 


source of manure. The Government should assist the develop- 
ment of oil-crushing industry in order to prevent this drain of 
India’s wealth. 

(/) Chemical Munurcs.-India is poor as regards mineral manures. 
Mineral phosphates are of poor quality. Crude nitre is available in 
Madras and Northern India. Gypsum is obtainable from the 
salt ranges. In advanced system of agriculture nitrogen is supplied 
from nitrate of soda, sulphate of ammonia, etc. In India, 
nitrogen is supplied by nature through rainfall, soil erosion, silts, 
etc. ■ But in recent years, production and consumption of 
fertilizers have considerably increased in India. The sulphate 
of ammonia is recovered as a by-product from coal at Tatanagar. 
The increasing demand for artificial manures in India is also 
indicated by growing imports from abaord The quantity of 
imports of such manures increased from 21,590 tons in 1925-26 
to 1,03,000 tons in 1939-41. But as Sir John Russell pointed out 
in his Report,^ the use of artificial fertilizers in India is very 
limited indeed. The relatively small amounts that are used 
are taken up almost entirely by the tea growers. It is now 
estimated that India requires, at least, 350,000 tons of chemical 
fertilizers every year. 

(g) Other Sources . — Other articles that are used as manures in 
India arc fish which are used at various places along the west coast 
where they are abundant but are not taken as food. Sea weed, is 
available in immense quantities in areas near the sea coast and is 
a valuable fertilizer. Rice- husk-ash discovered by the Govern- 
ment Economic Products Department as a valuable fertilizer is by- 
product of the Burma rice mills. 

In addition to these, the old methods of recuperating the 
soil by rotation of crops, raising mixed crops and leaving land 
fallow continue to be used to a more or less extent, though the 
pressure of population is a factor acting against the use of such 
methods. 

It should also be noted that the Imperial Council of Agri- 
cultural Research— a body created in 1929 at the recommenda- 
tions of the Royal Commission on Agriculture — constituted a 
standing Fertilizers’ Committee in 1930. This Committee 
undertakes research in the problems of indigendus manures and 
also prepares programmes of research on fertilizers. Each 
province receives a grant to collect and correlate data on manurial 
experiments undertaken in the provinces. 

1. Russell, Report on the work of Imperial Council of Agricultural Research, 
1937, p. 56. 



THE AGRICULTURIST AND HIS EQUIPMENT 111 

The food scarcity during the present war, especially the 
Bengal famine of 1943, has made the Government alive to the 
necessity of increasing food production in India. One of the 
steps taken to this end is to encourage the production of chemical 
manures in the country. Recently, a technical mission of British 
experts came to advise the Government in this matter* The 
mission was required to (0 investigate and report on the technical 
problems involved in the manufacture of sulphate of ammonia 
in quantities up to 350,000 tons per annum ; (ii) recommend, in 
the light of raw material and power available, the most economic 
method of manufacture ; (Hi) indicate the approximate capital 
cost of the plant or plants and calculate the approximate cost of 
operations and production of finished sulphate of ammonia ; (iv) 
recommend the most suitable site or sites for erection of the plant 
concerned, taking into account the raw materials, and the most 
economic distribution of the finished products ; and (v) estimate 
the amount and the approximate value of the plant which it will 
be necessary to import from outside India making the fullest use 
of the available raw material and labour* 

The mission in their report concluded that a single plant 
producing 350,000 tons of sulphate of ammonia per annum would 
be the most economical unit* They suggested that the factory 
should be state-owned and state-controlled* The Government 
has decided to establish a factory at Sindri, near Dhanbad in 
Bihar, for manufacturing 350,000 tons of sulphate of ammonia to 
start with. It has also been announced that the Government is 
investigating the prospects of erecting another unit of 100,000 
tons per annum on a site south of Vindhyas* . A mission is 
proceeding to the United States and Britain to negotiate for the 
purchase of plant and its erection* 

Among the states, Travancore has already secured plant and 
machinery for the manufacture of 60,000 tons of sulphate of 
ammonia per annum* The factory was to start working by the 
end of 1945* 

The Indian product will be subsidized by the State so that 
fertilizers are made available to the cultivators at prices which 
they can afford to pay* 

14. Agricultural Implements ; Agricultural implements 
in India arc, on the whole, well adapted to local conditions,’’ 
wrote the Agricultural Commission. “ They are within the 
capacity of the draught oxen, comparatively inexpensive, light 
and portable, easily made and, what is perhaps even of greater 
importance, easily repaired and they are constructed of material 



112 


ECONOMICS OF INDIA AND PAKISTAN 


which can be easily obtained.’’^ There is, however, great scope 
for improvement. The Agricultural Department has done some 
useful work in this direction, though much more could be ac- 
complished. The Department has introduced several types of 
improved implements like iron ploughs, sugarcane crushers, small 
pumping machinery, water-lifts, harrows, hoes, seed drills, fodder 
cutters, etc. But compared with the total number of Implements 
used in India, the improved varieties in use are no more than a 
drop in the ocean. For instance, the total number of ploughs 
used in India in 1925-26 was 25 millions while only 17,000 
improved ploughs were sold in that year. The estimate of total 
number of ploughs in use was about 32 millions in 1937-38 and 
6,716 ploughs of improved variety were sold through departmental 
agencies. The Royal Commission attributed the lack of progress 
in this matter to two facts : — ^Firstly, agricultural engineering was 
regarded as a secondary activity by the Departments and, 
secondly, the conservatism of the cultivator. The Commission 
suggested the reorganization of the Agricultural Engineering 
Section to remedy the first and greater propaganda to meet the 
second.^ Though expensive machinery like tractors, threshing 
machines, etc., are beyond the financial ability of the small holder 
and could be used only on co-operative basis, cheap improved 
implements could be brought within the reach of his purse. This 
could be done by producing parts of simple instruments on a 
large scale, by the railways giving freight concessions for their 
transport, and the Government giving rebate on import dutyi, 
if necessary, on iron and steel used in the manufacture of 
agricultural impiements. The Commission also warned against 
the excessive multiplication of improved types. It merely 
confuses the cultivator,’' they added, “ and makes him suspicious 
of the whole policy of the Agricutural Department.”^ The 
aim should be evolution of a small number ot types suitable for 
a wide range of conditions, and, therefore, suitable also for mass 
production. Improving the existing implements is more pro- 
mising than introduction of new machines. Moreover, the relation 
of the capacity of the cultivator’s bullocks to toe implements 
they are required to draw, demands careful investigation before 
new varieties are constructed. “If the draught capacity of the 
bullock should prove the limiting factor in regard to the adoption 
of improved implements in any part of India,” wrote the Com- 
missioners “ it is obviously useless, for the Agricultural Depart- 

I. Report, p. 107. 

? Expensive machinery, however, is being employed on a limited scale by 
large holders in Smd, Bihar, Central provinces and Bombay. 

3. Report, p. 110. 



THE AGRICULTURIST AND HIS EQUIPMENT 113 

ment to push the use of such implements in that tract until such 
time as a bullock has been produced which will prove equal to 
the work required of it, or until the condition of the present 
cattle has been improved to make them equal to drawing im- 
plements of greater draught/'"'* 

Thus, it will be seen how the various aspects of agricultural 
improvements are inter-connected. 

15. Improved Seed ; The importance of good quality seed 
needs no emphasis. The seed is indifferently selected by the 
Indian agriculturist. In many cases the grain kept as seed is 
consumed by the family by the time the sowing season arrives, for 
it deteriorates on account of the careless ways of preserving it* 
Then the peasant has to borrow seed from the money-lender. 
Such seed is of indifferent quality. Thus the quality of the 
product tends to deteriorate progressively. 

In recent years the agricultural departments have done good 
-work in the matter of making available improved seed to the 
agriculturist. New varieties have been experimented upon, 
especially in the case of sugarcane, jute and cotton, and, to some 
extent, wheat and gram, etc. Arrangements are made to make 
them accessible to the peasant through various agencies established 
by the Departments of Agriculture and Co-operation, and also 
through private shops. 

About 80 per cent of the total area under sugarcane, and 
about 50 per cent under jute is sown with improved seed. But 
progress regarding food and other crops is not so sajtisfactory. The 
greatest difficulty is that adequate supplies of good seed are not 
available. Sir John Russell recommended that the Imperial 
Council of Agricultural Research should consider the advisability 
of setting up some central organization in each province for the 
multiplication and distribution of seed of approved varieties.*-^ 

Another aspect of having improved seed is to prevent its 
deterioration through mixing with inferior seed. In this con- 
nection some years ago legislative measures were passed to prevent 
deterioration of cotton. Under the Cotton Transport Act of 
1923, a Provincial Government can notify any area in Which 
cotton of superior quality is grown, and prohibit the importation 
by rail, road or sea into such area^ except under licence, of ginned 
or unginned cotton, cotton seed or cotton waste. The Act is in 
force in certain areas of Bombay and Madras. Such an Act will 

L Report, p. 111. 

2. Report, pp. cit^, p. 50. , 



114 'ECONOMICS OF INDIA AND PAKISTAN 


not he effective in the Punjab where shott and long staple v^ietics 
are grown in the same tracts as in the colonies. Then there is 
the Cotton iGinning and Pressing Factories Act, 1925, under which 
adultetated ot damped cotton can be traced not only to the 
factory which ginned or pressed it but also to the original 
owner.^ 

16, Control of Crop Diseases and Pests : Closely connected 
with the problem of better seed is the control of pests and 
diseases of plants. If such diseases are left to take their toll, the 
gain obtained by better seed can be easily lost. The connection 
between these two is intimated also because certain varieties of 
seed can be evolved which are immune to disease or are disease 
resistant/’ 

The- problem is very serious in the case of sugarcane. A 
survey taken in 1937 showed that . 37 to 53 per cent of cane 
delivered to five factories in Bihar was infected as against 20 to 
35 per* cent In 1935. This shows that the trouble is spreading. 
It is estimated that the damage caused .by insects and P^sts to 
Indian crops is to the value of nearly Rs. 180 crores annually. 

The main preventives fall into two categories * XO Measures 
aiming at prevention of spreading of the disease from one locality 
to another, and (n*) measures to prevent and control the disease 
within a locality. 

(0 This involves prohibition of imports of diseased plants 
froin abroad, and measures to prevent spreading of dise^e from 
one province or state into another within the country. 1 here is 
an “Insects and Pests Act -which allows importation of plants in 
generab(\yith few exceptions) provided they are accon^anied by 
a health certificate and enter at a prescribed port. But insects 
and fungi that are harmless on their native soil imy b^^^ome 
destructive ih foreign countries. It' would, -jtheref ore, be safer to 
allow imports only of such types of plants as have been declared 
harmless by competent entomologists and mycologists after experi-- 
mentation with the plants at isolated places.”* 

,As. regards, the spreading of diseases within the country, the 
Insects and Pests ^ Act permits inter^provincial legislation to 
prevent this spread but full advantage has not been taken of this 
provision by provinces and states. 

(if) As to the second set of measures, they consist of adoption 
of resistant varieties, changing the condition of the soil or time 


1* Royal Cominission Report, pp. 101-06 and 120. 

2. Ganguiec, N., India What Now ? p. 129. 

3. Nanavati and Anjaria, The Indian Rural Problem, p* 94» 



THE AGRICULTURIST AND HIS EQUIPMENT 115 

of cultivatipn and destruction of pests by chemical or biological 
means. The Punjab campaign against spotted bollwo'rm of. cotton 
in 1938-39 showed that treated areas give the cultivators much 
greater yield than untreated areas.^ • 

In the interests of uniformity, Sir J. Russell recommended that 
executive action in this matter should be taken by the Central 
Government. : 

17, Livestock : Apart from land, the most important and 
the most expensive equipment of the agriculturist is his cattle. 
‘‘ Without them,’’ to quote MX. Darling, “ the fields remain 
unpIOughed, store and bin stand empty, and food and drink lose 
half their favour, for in a vegetarian country what can be worse 
than to have no milk, butter nor ghee?” On account of' his 
small and fragmented holding and limited financial resources, it 
is neither economical nor practicable for the Indian cultivator to 
use mechanical sources of power. The cattle alone serve this 
purpose. For ploughing his fields, for lift irrigation, and for 
carting his produce and manure they are indispensable. The are 
not only the {source of milk and milk products but also supply him 
with manure and cow- dung fuel when alive and when dead yield 
meat, skins, hair and bones for a variety of purposes. It has been 
estimated that .the Indian pattle, in spite of the fact that they are 
inadequately and lineconomically exploited, yield an annual 
inepme to the tune of over Rs. 1,265 crores. This is mote than 
the value of India’s cash crops.^ ' . 

In spite of the utility and importance of the cattle, however, 
there are certain unfavourable features pf our cattle population 
which deserve oun special attention. In the first place, India is 
supporting too many cattle to be economically justi%ble.. Accord.- 
ingJto the cattle census^ of 1935, India has about 310 million cattle 
of which about 220 millions are found in British India and the 
rest in Indian States. The total cultivated area in British India 
(excluding about 50 million acres of fallow Jand) is about 210 
million acres. Roughly, therefore,, in India we h^ve about 100 

K Nanavati and Anjaria, TheJndidn Rural Problem^ p. 94* . : 

2. F. Ward in Economic Problems of Modern India, edited by R. K. 
Mukerjee, VoL I, p- HO. 

3. Tbe total Indian cattle popmlatiDn including the Native States, but 
excluding Burma, afccording to the cenlus of 1935, was as follows ; 

Oxen' , ' .... 67,771,558 

Buffaloes- - ... 46,106,155 

Sheep and goats ... 196,658,151 


Total 


310,535.864 



116 ECONOMICS OF INDIA AND PAKISTAN " 


cattle for a hundred acres of land annually sown with crops. For 
Holland the figure is 38 cattle per 100 acres and for Egypt 25 
cattle. Further, it has been estimated that out of the 300 and 
odd million cattle in India as a whole only 60 million are working 
cattle. This gives an average of one pair of bullocks per 10 acres 
of cultivated land, “which is barely sufficient even in the Punjab 
where the largest working bullocks are to be found. In the 
other provinces, where a very large proportion of the cattle are 
underfed and undersized, the position is much worse, and the 
proportion of animals not capable of paving their way must be 
very large indeed.’’^ Thus India possesses a very large number of 
superfluous cattle. No wonder a foreign visitor remarked that 
“ India is being eaten by her animals,’’ 

How is it that there is an excessive population of cattle in 
this country ? There are various reasons. The prejudice against 
destroying life is so strong among the vast majority of the people, 
that they would rather starve the cattle than kill them. Second- 
ly, due to the inefficiency of the cattle and the high mortality 
rate among them the cultivator has to maintain a large number 
as reserve. The close connection between the “ inferior quality ” 
and excessive numbers has been well described by the Royal 
Commission on Agriculture, '\‘We are of the opinion,” wrote 
the Commission, “ that the census figures suggest the existence of 
a vicious circle. The number of cattle within a district depends 
upon, and is regulated by, the demand for bullocks, * The worse 
the conditions for rearing efficient cattle are, the greater the 
number kept tends to be. Cows become less fertile, and their 
calves become undersized and do not satisfy cultivators, who, in 
the attempt to secure useful bullocks, breed more and more cattle. 
As numbers increase, or, as the increase of tillage encroaches on 
the better grazing land, the pressure on the available supply of 
food leads to still further poverty in the cows ; and a stage is 
reached when oxen from other provinces ot male .buffaloes are 
brought in to assist in the. cultivation, Thi§ stage .has been 
reached in Bengal.”^ It should be noted that Bengal has the 
highest number of cattle per 100 acres of cultivated area — 109 
* compared with 68 in the Punjab and 43 in Bombay. 

The inferior quality of the Indian cattle may be attributed to 
indiscriminate breeding, underfeeding and disease. These are all 
inter-connected. Excessive breeding leads to underfeeding which 
in its turn to low resistance against disease. The problems of 


L F. Ward, op. cit, p. 139« 

2. Agricialtural Commission Report. 



THE AGRICULTURISF AND HiS EQUIPMENT 117 


breeding, feeding and control of disease, therefore, demand our 
special attention. 

18. Cattle Breeding : Indiscriminate breeding results from 
the fact that Indian cattle are allowed to roam about for grazing 
purposes in the village commons or on the stubble in the form of 
mixed herds. Indifferent qualities of cows are thus covered by 
indifferent qualities of bulls and thus a progressive deterioration 
of the race starts. To improve quality, breeding should be 
discriminate. Only good quality cows should be allowed to breed 
and they should be covered by' specially bred or selected bulls. 
This involves castration of all male cattle above a certain age 
except those regarded good enough for breeding. It also involves 
the supply of specially selected or specially bred bulls. The 
Veterinary Departments of the Government have recently begun 
to f^rform the former function. As regards the second, the 
Imperial and Provincial Departments of Agriculture are paying 
greater attention to the problem of breeding bulls. Very useful 
work is being done at the Hissar farm in the Punjab where 
Pedigree Mariana breed bulls are being raised and are supplied at 
low prices for breeding purposes to district boards, etc. Similar 
work is being done at Hosur farm in Madras. - The Imperial 
Agricultural Research Institute (removed to New Delhi in 1938 
from Pusa) carries on experiments for the purpose of evolving the 
strains of cattle with better milking capacity and suited to Indian 
conditions. In the Punjab, the Government has encouraged 
private, cattle breeding by giving grants of land to landlords but 
the success has been meagre. Lord Linlithgow with his scheme of 
*‘gift bulls” created a lot of enthusiasm in this matter and the 
Cattle Conference of 1937 also focussed public attention on this 
important problem. 

19, Cattle Feeding ; The cattle in India are underfed 
because : {a) the available area for growing fodder is not enough 
to feed them in view of the growing pressure of population on 
land ; and (b) the system of feeding is wasteful and careless. The 
cattle, especially the dry cows and non-working cattle, are left to 
themselves to get what they can from the waste lands. The 
problem can be solved by •: (0 reducing the number of cattle by 
eliminating the superfluous ones and by controlled breeding ; (ii) 
increasing the supply of fodder. This latter cannot be done by 
bringing more area under fodder crops because land is not 
enough for the purpose. Production of fodder, however, can be 
increased by cultivating higher yielding crops like Egyptian clover 
(Berseem) and other grasses. The Agricultural Departments have 
‘made useful experiments in this connection. Certain forest, areas 



118. 


ECPNOMICS OF INDIA AND PAKISTAN 


may be made accessible for grazing purposes by Government imder 
controlled conditions; (in) economizing fodder Aat is available. 
This, can be done by stall feeding the animals, by preparing silage 
from inferior straw and waste, by cutting grass atld preserving it 
as hay, by'chopping fodder by the fodder cutter, etc. 

, ,20.. Control of Cattle Disease : Indian cattle are sujEjject to 
periodic epidemics (e.g., rinderpest, foot and mouth disease) and 
diseases. These/are due to low vitality, unhygienic surroundings 
and, polluted drinking water. Both preventive and curative, 
measures are necessary. The Civil Veterinary Departments are 
performing these functions on a limited scale. As regards hygiene, 
it is a matter of education and propaganda and is a part of the 
general scheme of rural uplift. Prevention by inoculation with 
the various sera against epidemics has been tried on a limited 
scale.; . Lack of funds and the conservatism of the villager — vijaich 
latter is gradually disappearing— have been the main limiting 
factors. ^ Regarding the ^curative side of .the problem, veterinary 
dispensaries exist and itinerant staff of the department also visit 
villages to help the Cultivator but the number of such dispensaries 
is too small to adequately cope with the problem. For most 
villages the dispensary is at too long a distance to be of much uise* 
Increase in the number of such dispensaries is the real need of 
the hour. - 

We may conclude, therefore, by saying that what India wants 
is hot more cattle but better cattle and this object can be obtained 
by disdriminate breeding, more scientific feeding and a better 
control# of disease. " . ^ . 

21, Irrigation Facjflities ; However favourable the character 
of the soil, seed and manure, and however efScient the imple- 
ments and the cattle, if there is no adequate and regular supply 
of water, agticulture is a precarious business. W here rainfall is 
not seasonable, an adequate artificial irrigation becofixes -indis- 
pensable for agricultural operations. , , 

The average rainfall in India as a. whole Is 45’ per 

annum, but local variations are considerable. For instance, in 
Upper Sind and the Sputh-West Punjab the annual^ average is not 
more than 3 to 5 inches,' while in the“submdri%ne tracts of the 
United Provinces it is as much as from 50 to 1,00 inches. Not 
only the rainfall is inadequate in many places but it is also 
unequally distributed throughout the seasons. By far the largest 
proportion of the rain in the country (except South-East of the 
Peninsula) fajls^betwecn June and October. During the rest of 
the year it is very; little. It is because of this deficiency .df rainfall 



THE' AGRICULTURIST AND HIS EQUIPMENT 119 


md Its liability to failure- that before the era of railways' and 
canais, “ ghastly^ famines ravaged the country periodically and 
scarcity was the common lot of the people over large areas in 
many years/’^ 

In 1939-40,, the total sown area (including .areas sown more 
than once) in British India was 244*57 million acres of which 
55*08 million acres (or 23*9 per cent) were artificially irrigated* 
The importance of irrigation, however, varies considerably in 
different provinces^ as the following table indicates 


Major Province. 

per cent 
irrigated • 
to total 

Major Province. 

Per cent 
irrigated 
to total 


sown. 


sown. 

Sind 

... 88*1 

Orissa 

20*8 

Punjab 

... 58*3 

Assam 

... 8 7 

N.-W.F P* 

... 43*1 

Bengal * ... 

... 6*4 

Madras 

... 29*2 

Bombay 

... 4*3 

United Provinces 

... 29*0 

C. P. and Berar ... 

... 3*9 

Bihar ... 

... 21*6 




The low percentage of irrigation in Bengal and Assam need 
not cause concern because of the plenty of rainfall in those 
provinces* But it is obvious that the provinces of Bombay and 
C*P. and Berar where rainfall is deficient require more irrigation- 
al facilities than they possess at present. 

22, Kinds of Irrigation Works : There are three main 
types of irrigation works in India : (a) wells, (h) tanks, and (c) 

canals. The canals in their turn may be classified info i / 

(0. inundation canals ; - 

(//) perennial canals ; and •' 
iiii) storage works. 

Of the 55 million acres of net irrigated area in India in 
1939-40, 29 million acres or more than half, were irrigated 
by canals, 13 million or a little less than one-quarter by wells, 
6 millions by tanks and the remaining 7 millions by other 
sources.^ 

1. Sir Bernard Darley, Economic Problems of Modern Indkit op. cit*, p* 148 ; 
also Indian Year Book, 1944-45, p. 288, 

2. As regards the total area irrigated, the Punjab leads with 16^54 million 
acres, follow^^d by United Provinces (ir96 million acres), Madras (8*44 million 
acres), Bihar (5*04 million acres), Sind (4*43 million acres), Bengal (1*89 million 
acres;, Orissa (1’34 million acres), Bombay (1*14 million actes), C. P. and Betar 
(V06 million acres) and N.-W.F P. (P03‘ million acres). 

3. Among these may be mentioned lift irrigation from rivers and tempo- 
rary dams rot holding up flood water. 



120 


ECONOMICS OF INDIA AND PAKISTAN 


Ca) Well Imgatfon— The chief welhirrigated provinces in 
India are the Punjab, the United Provinces, Madras and Bombay, 
Wells are mostly private works but the Government also helps in 
their construction* This is by advancing what are known as 
takkavi loans^ and by exemption from enhancement of revenue, 
either temporarily or permanently ; lands that have been improv- 
ed by well irrigation, and by placing boring equipment and 
skilled labour at the disposal of the landlord. There are about 
2| million wells in India and the total capital invested in them is 
about Rs. 100 crores, 

(b) Tanks . — While wells are privately owned, tanks are 
administered by the State. Outside the Punjab and Sind they 
are found in almost all the provirices. Madras contains the 
largest number, about 35,000. They are of all sizes ranging from 
big lakes formed by the erection of high dams across the beds of 
large but. irregularly flowing rivers to village ponds. Most of 
the tank«‘ came from very early times and many of them have 
been silted up. They are of great use in places where it is 
not possible to construct canals. 

(c) Canals . — Canals are the most important form of irriga- 
tion at the present time. With very few exceptions they have 
all been constructed and are being maintained by the State. 
Canals are of two types ; perennial and inundation canals. 
Perennial canals have an assured supply of water all the year 
round. The inundation canals get water only when the river 
concerned is in flood. Some of the inundation canals in the 
Punjab and Sind are being transformed into perennial canals 
by putting some form of barrage across the rivers which flow 
throughout the year and thus diverting Water into the canals. 
The Sukkiir Barrage in Sind is the greatest work of its kind. It 
was opened in January 1932. We may also mention a third type 
of canals —storage works canals. They are constructed by build- 
ing a dam across a valley to store the rainwater during the 
monsoon. This water is then distributed for irrigation when 
required by the neighbouring lands. Siich works exist in the 
Deccan, the Central Provinces and Bundelkhand. 

Canals are classified by the Government in a different way. 
Before 1921 they were classified into (0 productive, (ii) protective 
and (Hi) minor. « ' ' . 

1. Loans given under the Land Improvement Loans Act of 1883. Under 
this Act advances are made to approved applicants at 6 per cent interest, 
^Bombay 5 per cent) and recovery is made by easy instalments, periods varying 
from 7 to 30 years. 



THE AGRICULTURIST AND HIS EQUIPMENT* 121 


(0 ' Productive works ' were expected to yield a net 
revenue sufficient to cover the interest charges on the capital 
invested within ten years of their completion. These are found 
mostly in Northern India and Madras and irrigated about 25 
million acres in 1929'-30. In 1938-39, they yielded' 7‘61 per cent on 
the total capital outlay of Rs, 114 crores. 

(ii) Protective" works were not expected to yield a direct 
return but were a measure of insurance against famines. While 
the productive works were constructed from funds raised by 
loans, protective works had to be built out of the current 
revenues. The cost was generally met from the annual grant set 
aside for famine relief and insurance. In 1938-39, such works 
irrigated 2*8 million acres and had a capital outlay of 3879 
crores* 


(iii) Minor works belonged to a miscellaneous class, e.g., 
tanks belonging to pre-British period taken over mostly and 
improved by the British* They were also financed from the 
cifirrent revenues. Among these a distinction was made between 
those for which capital and revenue accounts were kept and 
those for which such accounts were not kept* 

Since 1921 this classification has been abolished. Now loans 
can be taken for any work of public utility* Now all irrigation 
works for which capital and revenue accounts are kept are 
classified under two main heads, productive, and (//} unproduc- 
tive. A third category is of those for which capital accounts are 
not kept* ' ' 


23, Irrigation Development and Policy of the Government ; 

The policy of the Government with regard to irrigation has 
passed through many stages. 

(a) The first efforts of the British Engineers under the 
E I C were directed towards the improvement ot the old. exist- 
ing indigenous works. Such were tl^ Western ]umna Canal, 
thi Eastern Jumna Canal, the Ganges Canal and Itrigation Works 
the delta of the Cauvery and Kistna rivers. In the iunjap 
the Upper Bari Doab replaced the Old Hasli Canal which 
had carried water to Lahore and Amritsar m-oldeii days. In the 
Punjab and Sind some old inundation works were improved, e.g., 
Begari Canal and Euleli Canal. 

(h) -The second stage was of canal construction through 
nrivate companies. The first company, the East India .Irrigation 
Ixid Canal Company was formed in 1858 to construct canals 
in Orissa. Work was started in 1863. but by, 1866 the w^ole 



122i 


T EDOKOJ^IICS OF- INDIA^ AND PAKISTAN 


of the cat)ital of the company had been spent and in 1868 
the Government took over the work paying expenses to the 
company to date. Orissa canals were eventually completed^ 
similarly .was completed- the ’ Sone Canal in, Bihar which was 
a iparti of the company’s original scheme. Another company was 
known as the Madras Irrigation Company^ formed in 1863. This 
also proved a failure, and the Government was compelled to buy 
out the company after it had only completed one section of 
a vast scheme of Sir Arthur Cotton of utilizing the waters of the 
Tangbhadra and Pennar rivers. 

(c) The third stage was the construction of productive 
irrigation works by the Government - through -funds raised by 
loans* This led to the construction of five irrigation works 
of great magnitude, viz*, the Sirhind Canal in the Punjab, the 
Lower/ Ganges and Agra Canals in the United Provinces, the 
Lower Swat Canal in the North-West Frontier Province. This 
was during the last ^0 years of the 19th century. 

(d) The next stage was the construction Of colonisation 

cariUsTn the Punfab. In 1880, greater portion of the Punjab con-' 
sisted of arid waste with a rainfall which varied from 5 to 15 
inches per annum, and this desert area was sparsely populated by 
nomaid, tribes of camel and sheep graziers. In order to open 
up -some of these waste tracts, and at the same time to relieve 
the ^ pressure on land in highly populated areas elsewhere, 
Government took over these unclaimed lands as crown waste and 
embarked on a scheme of colonization.^ The country was 
surveyed and was divided into squares of land subsequently 
standardized at 25 acres' each and on this land were settled 
members of the various agricultural tribes from the. old districts. 
Eighty per cent of the land was given to small peasant proprietors 
in lots of from to 2 squares each. . Spon, new and improved 
villages and populous towns Jike Lyallpur grew up and the desert 
was turned* within a few decades into smiling fields .of wheat, 
cotton and sugarcane. - \ 

^ /'Thcjfirst colony ^canals were the Sohag taken out of the 
Sutleji.jbelow perozepore, and the Sidhnai in Multap district. 
Xhe former was later absorbed into the Siitlej Valley Canals. 
These were followed by the Lower Chenab Canal' which created 
the Lyallpur Colony. It is one of the largest and most success- 
ful, and remunerative canals in India and irrigates 2i million 
acres annually. - t . 


' - 1* Sir Bernard Dariey, op. cit., 157 ^ 



THE AGRICULTURIST AND HIS eQUlTMlNT 123 


Ce) The next stage was the construction of FamihePl-otective 
Works. After the great famine of ISTT-TS, it was decided to set 
apart a sum of Rs. 150 lakhs known as the Famine ^ ‘Relief 
Insurance Fund. Part of this was to be utilized for famine relief 
when necessity arose and one-half was allotted for the construc- 
tion of railways and canals. Later, the whole amount was 
available for irrigation works. The idea was to construct works 
in order to protect the country from famines. Under this 
scheme the Betwa Canal was constructed in the Central Provinces 
with two storage reservoirs. Moreover, Rushikulya project was 
undertaken in Madras and several important storage schemes 
were inaugurated in Bombay, Deccan, e.g;, Nira and Periyar -Canal 
systems fed by lakes held by massive masonry dams. Further- 
more, in Sind, two important works were undertaken, the Jamrao 
and Western Nara Canals taken from the left bank of the Indus 
at Rohri. 

if) Indian Irrigation Commission, 1901-03. The appoint- 
ment of this commission was the result of the success of produc- 
tive and protective works undertaken during the second half 
of the 19th century. The Commission reported In 1903 and laid 
down a definite policy regarding the selection, financing and 
maintenance of canal works.” As a result a large number of new 
works were undertaken between 1905 and the outbreak of the 
Great War in 1914. The most important of these was the .Triple 
.Canal Project in the Punjab which linked up the Jhclum, Upper 
Chenab and Ravi rivers and led to the construction of the Upper 
Jhelum, Upper Chenab and Lower Bari Doab Canals. During |:his 
.period, work on Lower Jhelum Canal (started in 1897) was also 
completcd> Most of the other works constructed following the 
recommendations of the Irrigation Commission, were famine pro- 
tective works, in the hilly tracts of the Central Provinces, Bombay, 
Deccan and Bundelkand. Tn 1914, the’ Upper Swat Canal was 
opened in the N.-W. F. Province; Another canal completed 
during this period was Triveni Canal in Bihar. 

(g) Post-War (1914-18) Developments.^ After the inauguration 
of the Reforms of 1919, irrigation became afr^erved) provincial 
subject. The provincial governments now^- possess much larger 
initiative in the construction of canals. They have to obtain 
the sanction of the Government of India and- of the Secretary of 
' State only if the estimated cost is more than Rs. 50 lakhs. Loans 
can be taken not only for productive works but also for othei 
works. Money can also be utilized from the Provincial 
Insurance Grant when it is tiot required for famine relief; 



m 


lOQNQI^lCS OF INDIA AND PAKISTAN 


■ ’ Due to the |)pst-war period of prosperity many new irrigation 
schemes were launched. Several important works have already 
been completed. Three of them deserve special mention : (/) 
The Sutlej Valley works in the Punjab, completed in 1932-33 
are estimated tp irrigate an area of 5 million acres. Their 
total cost up tO; the year of completion was Rs. 33*31 crores. (ii) 
The Sukkur Barrage and canals in Sind opened in 1932 are 
estimated to irrigate 5 k million acres. The cost of these was 
Rs. 24 crores. (///) The Sarda River irrigation scheme irrigates 
part of Rohilkhand and Oudh in the United Provinces. This was 
opened in 1928 and is estimated to irrigate a million^ acres. 
Another work completed recently is Cauvery Mattur Project in 
Madras, which will irrigate 3C0,000 acres. The Nira Right Bank 
Canal Scheme with which is connected the Lloyd Dam is one of 
the biggest of its kind. The Damodar Canal in Bengal has been 
recently opened. In Northern India there is the Haveli Canal to 
utilize spare water in the Chenab river below its junction with 
Jhelum, and 'will command H million acres. The Thai Project 
was proposed but has been postponed indefinitely for financial 
reasons. 

The Agricultural Commission recommended a closer relation 
between the Agricultural and Irrigation Departments. They also 
recommended the creation of local advisory committees (like the 
railway advisory committees) to deal with complaints about matters 
connected with irrigation. Finally, they recommended that a 
Central Bureau of Irrigation should be established at Delhi. 
Such aBureaU'Was established in May 1931, as an essential adjunct 
to the Central Board of Revenue. , ‘‘ Its main objects are to 
ensure free exchange of information and experience between 
provincial irrigation officers, to co-ordinate researches in irriga- 
tion matters and disseminate results achieved.^ 

24, Future Scope for Extension : The f.uture scope for ex- 
tension of irrigation does not lie in the construction of big 
projects. “ The day of great irrigation schemes in India is now 
over, ’’ says Sir Bernard Darley, “ and it will be necessary to turn 
more and more to the sub-soil water table as the source of supply 
when new lands have to be developed in order to meet the ever- 
increasing pressure’ on land as the population of India expands.’^ 
In this connection possibilities of tube wells worked by water- 
generated electricity have great scope. Electric power generated 
at a canal fall on the Upper Bari Doab has been utilized for pumping 
water for a number of years. A bigger scheme in U.P. utilizes 

I* See Indian Year Bo|?A, 1943-44, Pr313- 



IRE AGRICULTURIST AND HIS EQUIPMENT 125 

hydro-electric power, dev^eloped at the falls of the Ganges Canal, 
for the purpose of pumping water from tube wells. The electricity 
, is being used for lighting and power’* purposes in the adjacent 
towns and landlords are being encouraged to sink tube wells to 
irrigate high class crops like sugarcane,^ wheat and cotton. Some 
tube wells have been installed by Government, each capable of 
irrigating 250 acres of wheat, and 150 acres of sugarcane a year. 
Two schemes have led to pumping water from low lying streams 
which could not have been utilized otherwise. The Mandi Hydro- 
Electric works of the Punjab also has possibilities of a similar 
kind. 

25. Economic Benefits of Irrigation ; There has been an 
enormous growth in the area irrigated by Government works. In 
1878-79 j such area was 10*5 million acres in British India, in 1938-39 
it was 32*61 million acres. Most of this increase has been due to 
productive works, from 4*5 million acres in 1878-79 to 24*7 1 million 
acres in 1938-39. The total length of the main and branch line 
canals and distributaries in operation in 1938-39 was 74,341 miles 
and the estimated value of crops supplied with water by Govern- 
. ment works was Rs. 109*35 crores. 

By 1938-39 the total capital invested in Government works 
including those under construction had amounted to Rs. 152*80 
crores (Rs. 42*2 crores in 1900-1). The net return to Government 
on this capital for that year was 5*89 per cent in spite of the fact 
that Rs. 38*79 crores had been spent on unproductive works which 
yielded less than one per cent. In the case of productive Punjab 
works, the dividend was as high as 13*65 per cent, while Deccan 
works yielded from 1 to 2 per cent and those in the United Pro- 
vinces 6*38 per cent. It should be remembered that some of the 
new works have not yet begun to yield returns to their maximum 
capacity as they would do in the future. 

“ But the benefits of irrigation,” in the words of .Sir Bernard 
Darley, “ cannot be measured only by Government receipts nor 
indeed by the area irrigated, India has an ever-growing population 
which must be fed ; the time is not far off when every available 
acre will be cultivated and still more land will be required to raise 
food for the multitude. The only remedy for this desperate situa- 
tion will be to increase the yield , from the land already under 
cultivation. Much has already been -done in this direction with 
the help of canal irrigation ; the cheaper classes of grain, more- 
particularly millets and pulses, have given place to good rice and 
wheat, and the diet of the people has improved accordingly. The 
yields also have been increased enormously with the introduction 



126 ‘ ECONOMICS OF INDIA AND PAKISTAN ^ 

of improved seed by the Agricultural Department. Muchj how- 
ever, remains to be done and it is safe to say that with better seed 
and more efficient cultivation the yield from crops in India could 
be increased by from 30 to 50 per cent according to the locality. 
Thus as the pressure of the population on land increases, the value 
of those great irrigation works, constructed in the past, will be- 
come more and more apparent. , In the meantime, they have 
banished the grim spectre of famine and brought peace, prosperity 
and a higher standard of living to the whole country.’’^ 

26. Dangers of Irrigation : Construction of large irrigation 
projects has not proved an unmixed blessing. Water-logging and 
salt effervescence in certain areas have led to deterioration of the 
soil and creation of unhealthy surroundings. In the Punjab^ and 
Bombay, for instance, a good deal of land has become unfit for 
cultivation due to this reason. “ Water-logging may be defined,’’ 
says Prof. Brij Narain, ‘‘ as the rise in the level of sub-soil water 
which renders land unfit for cultivation. The approach of the 
danger is marked by certain well-known stages : 

(/) For one or two years barani crops are unusually successful, 
and there is a spontaneous growth of the rich crop maina. 

{ii) In the third year patches of hollar begin to appear on the 
affected fields and seed does not germinate on these patches. 

iiii) Yield begins to diminish, and the patches extend till they 
cover the whole field. 

(iv) Depression in close proximity to the canal remain perma- 
nently damp and have water of a rusty colour. 

(v) The spring level rises and comes closer up to the surface of 

the land. - . 

(vO Houses in the ahadi begin to crumble to dust and even- 
tually collapse. , ‘ 

{viO An obnoxious odour is emitted by ahodis and the drink- 
ing water tastes raw.”^ 

What happens actually is that :|iie salts of the soil come up to 
the surface with the rise of the sub-soil water level. The canals 
• act in two ways in causing this phenomenon. They interest 
drainage line and cause rain pi flood water to be held up. 

1. £{;onomtc Problems of Modern India, Vol. I, p. 167. 

2. As far jback as i92.6-27 . in the Punjab. . 126^000 acres had already feeen 
thrown out of cuitiyation and 700,000 acrei were in danger of water-loggings* 

3. Brij Narain, Indian Economic Life, p. 383. 



THE AGRICULTURIST AND HIS EQUIPMENT 127 

Secondly, they cause their own water to fall vertically -until it 
reaches the spring level. If the sub-soil outflow is not enough 
to balance the' inflow, the spring level rises being drawn up by 
capillary attraction and all the salts of the earthcome to surface 
and make the land unfit for crops/’^ 

The . remedies usually suggested for this phenomenon are : (a) 
Pumping^ out of water by tube wells and other methods of drain- 
age. (b) Proofing of canal beds by concrete. But this does not 
affect the channels, (c) Opening out of closed and obstructed 
drainage. But this may involve the remarking of the whole canal 
id) Replacing canal irrigation by well irrigation. This would be 
very expensive, though the expense may be worth-while where 
the danger is imminent, (e) Prevention of over-irrigation, by 
changing the system of supply, to force the cultivator to econo- 
mize water. The present system of supply leads to over-irrigation. 
It is estimated that from 30 to 50 per cent excess water is applied 
to wheat in Northern India. Charge for water is made not 
according to the water used but according to crops matured. 
Moreover, the supply is uncertain and the cultivator naturally tries 
to irrigate as heavily as he can. The sale of water by volume has 
not been tried but it is held that it would make the cultivator 
economize water. 

27. Water Rates : A few words may be said about the fixing 
of water rates by the Government. The maximum that the Gov- 
ernment can charge is indicated by the net benefit derived by the 
cultivator from canal water. This will mean the appropriation of 
the whole of the increase in the return from land due to the use 
of canal water. This would be impossible since some of the lands 
in, the colonies would yield practically nothing without canal 
water. The minimum is represented by the cost of supply to the 
Government including interest on capital sunk in canals, and their 
maintenance charges. This will come to much lower than the pre- 
sent charge. 

.Charging according to cost of service is indefensible, on various 
grounds ; It will give benefit of canal construction to a section of 

1. Brij Narain, Indian Economic Life-, p 383. 

2. A scheme has recently becn‘prepared by Punjab engineers for pumping 
4,100 cusecs from the Ravi-Jhelum canal tract in the Punjab. By means of hydto- 
electric.pQwer to be generated at a 80 ft. fall from the Jhelum canal, 2,500 tube 
wells of 2 cusecs each will be operated in pumping two-thirds of percolation 
water back into the canals. This will not only lower the water table and save 
hundreds of thousands of acres from deterioration due to alkalinity, but also 
expand irrigation by some 750,000 acres. {Indian Information, Decehiber 1, 1944, 
p. 679X 



128 


ECONOMICS OF INDIA' AND PAKISTAN 


the people (about 1/3 of the total population in the Punjab for 
instance) while the water of rivers is the property of the whole 
communityr The canal cons^truction in the Punjab was financed 
partly from the surplus revenue of the province and partly out of 
borrowed money advanced on the security of the general revenues. 
Part of the money came from the sale of lands irrigated by the 
canals. Some of the benefits, therefore, must be shared by the 
people as a whole. Some people present the analogy of the rail- 
ways and draw attention to the low profits made by them on 
capital (4 to 5 per cent of N.-W.R.) compared with high profits 
from canals (about 15 cent made by the Punjab Government). 
But this analogy is' not admissible, since the benefits from the rail- 
ways are enjoyed not by one fortunate section of the people but 
the whole community. Canals, therefore, must contribute to the 
general revenues. In other words a part of the water rates must 
be in the nature of a tax. The rate, however, should be fixed fairly 
light in order not to be too burdensome on a class of people most 
of whom are in poor circumstances.^ 

28 The Agriculturist : Finally, we come to the agriculturist^ 
himself — the man behind the plough. What is this personal 
equipment“physical, mental and moral ? Seemingly contradictory 
views have been expressed by authorities in this con/iection, , Dr. 
Voelker in his able report on the agricultural practice in India 
admired “ the careful husbandry combined, with hard labour, 
perseverance and fertility of resources of the Indian agriculturist.” 
The Agricultural Commission in 1928 admitted that “ in the 
conditions in which the ordinary cultivator works, agticultural 
experts have found it no easy matter to suggest improvements.”’^ ‘ 
These views seem to suggest that it is the environment rather than 
the cultivator who is at fault. On the other hand, Calvert quotes 
an Irish writer : “ The wealth of a nation lies not in the material ' 
resources at its command, but in the energy and initiative and | 
moral |tness of its people; without these “‘attributes no country 
can become permanently prosperous ; with them, no unfavourable 
circurfistance can long prove an insuperable obstacle.”^ The 
implication is^ that people of the Punjab (or India) are poor 
because they lack these qualities (and not because of any physical 

' L For a fuller discu^ssion of the subject sec Report of the Punjab Abiana 
Commtttee (1933) and Indian Taxation Inquiry Committee (1922), 

2/ For distinction between the absentee landlord, peasant farmer, tenant 
cultivator and Agricultural labourer and their significance from the point of view 
of agricultural productivity, see chapter on Land Tenures. 

3. Report, p. 14. 

4. Calvert, op cit*, p. 47. 



THE AGSlCULtORlST XND' HIS EQUIPMENT 129 


obstructions). Mr. Keatinge recognizes that the Indian cultivator 
may be strong, industrious and intelligent,^’ but adds that If 
he is to do good work he must be prompted* by an adequate in- 
centive and sustained by adequate food,” 

The truth of the matter is that where circumstances are 
favourable, the Indian peasant does show considerable native 
intelligence, industry and resourcefulness. Bat where rainfall is 
precarious or system of land tenure is oppressive, these qualities 
get undermined. In a general way, however, it is true that our 
rural masses are far below the standard of physical, mental and 
moral development which would be regarded as minimum' in a. 
more advanced country. The causes of this backwardness are. 
partly historical and political, partly social and partly climatic. 
Each set of causes is inextricably mingled with the others. The 
emphasis laid on a particular cause or causes is determined mostly 
by the political creed of the writer concerned. For instance, the 
Indian nationalist tends to over-emphasize the political factor as 
it is at present. The apologist of the British administration, on 
the other hand, puts the whole blame either on the pre-British 
administrations or on the social and climatic factors. Confusion 
arises from the fact that there is a substantial element of truth in 
each of these views. The scientific inquirer must try to be as 
objective as possible and give due weight to each of the factors 
of the situation. 

Whatever the causes that have brought about the present' 
state of affairs, no one, however, can deny the facts as they are. 
There is no denying of the fact that the Indian cultivator is 
inferior in physical health and energy to his counterpart, for 
instance, in Great Britain and America, even in the European 
countries. He is subject to a host of endemic and epidemic 
diseases. Our villages are ravaged by major diseases like malaria, 
plague, cholera, dysentery, tuberculosis, kala atar and hook- 
worm, These diseases not only cause high rate of mortality, 
with all its wasteful consequences, but undermine the physical 
efficiency of those who -survive the attack. People chronically 
subject to disease, moreover, become lethargic, listless and 
apathetic. The solution of this problem implies both preventive 
and curative measures. The .Public Health and the Medical 
Departments of the Government ate doing -some work in this 
connection, but most of .their benefits are showered upon the 
urban areas. In view of their numbers and the contributions 
they make to the revenues of the State, the rural masses receive 
insignificant help. A large scale publicity campaign is necessary to 
awaken the people to the importance of public health measures. 



130 ^ ECONOMICS OF INDIA AND PAKISTAN 


’ In 'the second place, the chronic illiteracy of the rural masses 
can hardly be denied. When the literacy in the country is only 
8 per cent and literate persons are mostly concentrated in towns, 
the share of the literates falling to the villages can be easily, 
imagined. Add to this the fact that our educated classes are, the 
product of a universally condemned system of education,' which 
produces book' worms rather than practical men of the world. As 
regards agricultural education, after half a century of effort, how 
many practical farmers have been produced by our agricultural 
colleges ? Practically none. A radical change in our system of educa- 
tion is immediately called, for, so that it should produce practical 
and enlightened men of the world. From the point of view of 
agricultural progress we require peasants with a good minimum of 
general education and also technical education and training to 
make good farmers. But such farmers cannot be content with 
the tiny holdings that are available for them in the villages. 
Moreover, our, villages must be made more attractive and pro- 
gressive to induce educated men to settle there. This shows how 
the whole structure bf our economic and social life requires a 
simultaneous reform if not a radical overhauling. 

With better physical health and education of the right kind,, 
the whole outlook of the villager will change. At present he is 
condemned as ignorant, superstitious, fatalistic, improvident and 
extravagant. It is said that he lacks initiative and tends to stick to 
his old Ways of life and work ; that he has no desire to improve 
his standard of living. If he gets larger income due to some 
chance, he reacts by being extravagant in expenditure on social 
ceremonies or on litigation. These accusations are true, though 
not always without qualification. But all defects are curable by 
persuasion, propaganda and education on the right lines. Some 
work has been done by the various Government Departments, 
Agricultural, Co-operative, and Rural Reconstruction. Biit a 
well-planned, cbmprehensive and nation-wide effort is necessary 
to bring any substantial and permanent results, 

49. Second String to His Bbw; When inpome from 
agriculture is so meagre and so uncertain, and agricultural opera- 
tions do not occupy the cultivator all the months of the year, 
there is necessity and opportunity of creating alternative sources 
of income. .In the Punjab and, to a lesser extent elsewhere, the 
army offers an outlet for the surplus population. In agricultural 
areas near the industrial towns organized industry draws labour 
from the villages. But the villager can augment hjs income 
without leaving his village and hjs normal occupation. This. Ixe 
can do by following a, number of subsidiary occupations clcis^X 



THE AGRICULTURIST AND HIS EQUIPMENT 131 


related to agriculture. Such occupations are : Cotton spinning 
and weaving, bee-keeping, sericulture, lac culture, poultry breed- 
ing, sheep rearing, cattle breeding, dairy farming, basket making, 
fruit farming, oil extractibn from oil-seeds and oil-fruits, manu- 
facture of flour, starch and glucose; making of gur and canning 
of fruit, etc. 

To take one example of what can be done in this connection, 
mention may be made of the remarkable results achieved by 
Dr. Hatcli, ‘‘ He has introduced at Martendum a number of sub- 
sidiary industries such as basket and mat making ; thread and coir- 
rope making ; hand weaving (including all processes of preparing, 
sizing, dying, and bleaching yarn) ; preparation of tamarind ; 
growing pine apples and cashewnuts ; making palmayra gur and* 
umbrellas ; manufacturing kuft-gari links and pendants, etc. For 
youngsters' handicrafts have been started which involve less 
strain, such as making of Christmas cards and fans from palmayra 
leaves ; preparation of lacquered articles such as candle sticks, 
boxes, games and toys ; fret work and net making for tennis and 
other games.”^ Good financial results have been obtained from 
these activities. 

Subsidiary occupations can help, but they cannot be regarded 
as a final remedy for the growing pressure of population on land. 
In* the words of the Royal Commission on Agriculture, the 
contributions which rural industries can make in reducing the 
heavy pressure on the land is infinitesimal, and in the nature of 
things they cannot, as a rule, hope for ever to survive the increas- 
ing compedtidn of organized machinery, , . To put it briefly, the 
possibilities ' of improving the conditions of the rural population 
by the establishment of rural industries are extremely limited,"^^^ 

The most effective remedy, therefore, is planned industrializa-- 
don of the country. 


1, Nanavaci and Anjaria, op. cit., p, 3?4* 

2. -Report^ pi 188^ 



CHAPTER VI 


MARKETING OF AGRICULTURAL PRODUCE 

1. Introduction s In a self-sufficient village economy, as it 
prevailed in India a hundred years ago, the problem of marketing 
was not so important as it is today. Then, all that was produced 
Was consumed within the village or in the immediate neighbour- 
hood. Now the produce of the village finds consumers in distant 
places, not only within the country itself, but also in the outside 
world. With the sale proceeds of the surplus produce of the 
village — of foodgrains, cotton, sugarcane, oil-seeds, etc.“are pur- 
chased goods produced in distant parts of the country and the 
world. Even now, however, most of the food requirements of 
the village are met from within. The surplus available, however, 
is greater in the case of non-food or commercial crops like cotton, 
jute and oil-seeds. These are converted into money, if not for 
other purposes at least to make land revenue payment to the 
Government* 

The economic position of the peasant thus does not merely 
depend upon the total amount of production that he can secure 
from his land, but also on the money value of the surplus that 
he has to sell in the market. He has little control over the prices 
which prevail, because they are determined by the broad factors 
of supply and demand operating in the country and in many cases 
in the world at large. His costs of production also may be regarded 
as more or less fixed. Even then his sale proceeds can be increased 
by better handling of the produce and reducing to the minimum 
the portion going to the various intermediaries between him and 
the ultimate consumer of his produce. This can be done by 
saving him from the consequences of the various handicaps from 
which the farmer suffers either because of the inherent character 
of agriculture as a profession or from the peculiar circumstances 
under which he works in India, Agriculturists in all countries 
are handicapped in certain respects. The seasonal and scattered 
character of their operations, the great role that nature plays in 
making it a success, the inelasticity of demand for agricultural 
products, raise many difficulties of organization and make adjust- 
ments between supply and demand uncertain. In addition to 
these, the Indian peasant is handicapped by his illiteracy, ignorance, 
conservatism, small unit of cultivation, lack of proper financial 



MARKETING OF AGRICULTURAL PRODUCE 133 


aid, defective means of communication and transport and a host 
of other individual and social disabilities. In this chapter we 
shall study the nature of some of the important handicaps from 
which our agriculturist suffers as a seller of his produce and then 
take note of the various remedies either suggested from time to 
time or actually adopted to improve his position. To quote the 
Agricultural Commission, “ until he (the peasant) realizes that as 
a seller of produce, he must study the art of sale, either as indivi- 
dual or through combination with other producers, it is inevitable 
that he should come off second best in his contest with the highly 
specialized knowledge, and the vastly superior resources of those 
who purchase his produce/’^ 

2. Essentials of Good Marketing : In order that the 
produce may be sold to the best advantage of the producer, 
several conditions must be present. In the first place, the quality 
of the produce should be good. Agricultural commodities 
cannot be produced in a standardized form as manufactures can 
be. But quality can be ensured to some extent by using the 
best available seed ; by adopting efficient and clean methods of 
cultivating and harvesting it by grading and standardizing the 
product and by storing it in good storage places to prevent 
deterioration. This is the first essential of good marketing. If 
good and bad qualities of the product are mixed, as has been the 
case in India, the reputation of the whole produce suffers and 
price obtained is of the standard of the worse rather than of the 
better quality. 

The second essential of good marketing is the staying power 
of the seller. If he is hard pressed to sell all his produce im- 
mediately after the harvest, the selling pressure will depress prices 
for all the agriculturists and will reduce their sale proceeds. It is 
necessary, therefore, that either the peasant should have enough 
reserve of his own to meet his requirements — of land revenue 
and other immediate payments due from him — ^or arrangements 
should exist for him to get money on credit at reasonable rates 
of interest. If the getting of credit throws him into the clutches 
of a rapacious money-lender — which is too often the case in 
India — the remedy may be worse than the disease. 

The third essential of good marketing is existence of good 
means of communication and transport. The cultivator-seller 
should be in touch with the mov'ements of prices in the markets 
to enable him to take advantage of favourable prices. The 
v4llager should have convenient access to the market. The roads 


Report, Agricultural Commission, p* 382* 



134 ECONOMICS OP INDIA AND PAKISTANI 

shotil4'be' well planned and well kept or there may be waterways 
facilities.. If the transport facilities are absent, the peasant would 
prefer selling to itinerant purchasers or village banias — as is most- 
ly the case in India — instead of carting his produce to the market 
for better returns. 

Finally, there should be well conducted markets at conve- 
nient distances from the producing villages. It is necessary that 
these markets should be properly regulated and be under impartial 
supervision and control. If the market practices are arbitrary, 
the cultivator will lose confidence in them and would prefer to 
seU his produce in his own village on comparatively unfavourable^ 
terms. Proper access to markets also implies the absence of 
transit, .charges like octroi, terminal taxes, etc., which serve as 
discouragements to the cultivator-seller. Marketing in India 
lacks almost all these essentials in varying degrees. 

3 The Present System — Produce Sold in Villages : It is 
difficult to say what proportion of the total produce on the 
average* is sold' by the Indian cultivator and what is kept for his 
household requirements. Obviously, the proportion will differ in 
different localities and with different agriculturists according to 
their economic strength and the nature of the commodity con- 
cerned. The ‘‘surplus” sold will be greater in the case of 
commercial crops than the food crops. The more prosperous 
cultivator^ may sell a larger proportion of their total produce in 
the end, though they may sell a small- proportion of their total 
surplus at harvest time on account of their greater power to wait. 
In Bengal it has been estimated that normally 54 per cent of the 
total rice c.rop is retained by tlic producer and 46 per cent is sold.^ 
The average cultivator, or\e,may say, produces mostly for his 
■family needs and sells only what is necessary to meet his monetary 
obligations to the Government and the money-lender and for 
sundry household expenses. Even in a prpspetous Runjab 
district like Lyallpur, 23*9 per cent of the cultivators make no 
sales.*^ ' ‘ 

There is, however, more definite information as to the pro- 
portion of the produce sold in the village and that taken to the 
market by the cultivator. One investigator^ has estimated that 

4. It has, we think, been established that when the culi^iVator is in a 
position- to dispose of his produce in a market, however limited his scope and 
badly organized its charactet, he obtains a much better price for, it, v^hen the 
cost of transport is taken into accoupt, than when he disposes it of in his oy^n 
village.” . Agricultural Commission Report, p. 388. ‘ , 5 

' 2. ^Marketing of Rice in India and Burma, p. 492, 

3. Mukerjce, Economic Problems of Modern India, Vol. I, p. 299. 

4. Hussain, Marketing of f Agricultural Produce in NdrthernJndia,- p, 



MARKETING OF AGRICULTURAL PRODUCE 135 


60 pet cent of' wheat, '35 per cent of cotton and 70 pet cent of ‘ 
oihseeds are aoldin the villages or village markets^ in the Punjab. For 
the United Provinces the respective figures are 80 per cent wheat, 
40 per cent cotton and 75 per cent oil-seeds. In Bihar, Orissa and 
Bengal 85 per cent of oil-seeds and 90 per cent of jute is sold in 
the villages. The proportion of produce sold in the markets 
diminishes as cultivators are debt-ridden or carry on subsistence 
farming in tiny holdings. In Attock district of the Punjab 98*6 
per cent of the cultivators dispose of their surplus wheat to local 
banias who happen to be their sahukars also*”‘^ The proportion 
of produce sold in the outside markets also diminishes where the 
means of communication and transport are not adequately deve- 
loped. 

The produce that is sold in the village (apart from the portion 
that is directly sold to non-agriculturist consumers living in the 
same village) is sold to various kinds of middlemen through 
whom it ultimately reaches the larger markets and distant con* 
suming centres. These middlemen may appear in the form of 
the village bania (who may be the village shop-keeper and also the 
money-lender to the peasant) or various itineranf^ beoparis 
either purchasing on their own account or as agents of some 
arhtiya in the secondary town market. But where the money^ 
lender has his grip over the peasant, the latter is not a free agent 
to dispose of his produce as he likes. The debtor usually has to 
sell it to his creditor, on the latter’s terms. In any case, when the' 
produce is sold in the village, as the Agricultural Commission 
pointed out, the cultivator obtains much less favourable terms 
than he would do if he carted it to the market, however badly 
organized the latter may be. But to take it to the market he 
requires means of carting and good roads, 

4. Transportation to Markets ; One of the reasons why 
only a small proportion of the produce is taken by the cultivator 
to the market is the bad condition of roads. This also accounts 
for the variety of itinerant grain dealers and carriers in India. 

Communications from the field to the village and from village 

1. Village markets are of two types: (i) Periodical markets in rural areas. 
These can' be bi-weekly or fortnightly markets held in the countryside where 
cultivators sell small quantities of agricultural produce and buy clothi kerosene 
oil, etc. Here small itinerant dealers arc able to collect agricultural produce, (li) 
Big fairs held periodically associated with certain religious celebrations, e.g., 
fairs held in Hard war, Allahbad, etc. Here also considerable sales of produce 
take place. 

2. Mukerjee, op. tit., p 299. 

3. Itinerant middlemen go under different names in the various provinces: 
Beoparis in the Punjab, Banjaras in C.P., etc. 



136 ECONOMICS OF INDIA AND PAKISTAN ' 

*to the mandi are often extremely poor and defective. Bad roads, 
lanes and tracks connecting villages with the markets not only 
add to the cost of transportation and aggravate the strain on 
bullocks and other pack animals, but also lead to the multiplica- 
tion of small dealers and intermediaries. They also restrict 
markets by hindering cheap and rapid movement of agricultural 
produce/'^ The difficulties are greater in hill districts where the 
cultivator is often at the mercy of the grain dealer who alone can 
command enough animal power to undertake the transport of 
produce. 

As regards means of conveyance, the produce is carried to 
the market in bullock or camel carts, on pack animals, such as 
camels, ponies, buffaloes and donkeys or in head loads. Different 
methods are used according to the circumstances of different 
localities. River transport has declined in the Punjab, U.P. and 
Bihar, but is still of considerable importance in Northern and 
Eastern Bengal and Assam as well as in the coastal plains of South 
India. In Northern India, the cart and pack animals are predo- 
minantly used. It is estimated that at Amritsar nearly 50 per cent 
of cultivators and village beoparis use carts and 50 per cent use 
donkeys, while at Hapur 75 per cent use carts and 25 per cent 
donkeys.*'^ Motor transport has also become important in some 
localities. “ Motor vans loaded with assortments of fruics come 
from Srinagar and Rawalpindi as far as Cawnpore, Betweeri 
Cawnpore and Calcutta there is also motor lorry goods traffic/’*^ 
This, however, concerns inter-provincial transport. We are 
talking of carriage from the village to the nearest markets. 

5, Sale in the Market : Such markets may be organized or 
unorganized. The unorganized markets are more or less of a 
primitive character. There are no set customs or rules of pro- 
cedure as regards sales and settlement of accounts. There are no 
permanen.t functionaries. They are small mandis in which 
though the arhtiyU may be found but he is hardly a wholesale 
dealer. He is, rather the primary distributor who simply passes 
on the produce to the bigger arktiya in the larger mandi. He is 
often financed by the latter. 

Organized markets have developed in localities where staple 
products like wheat, cotton, sugarcane and Jute are largely grown. 
In such places specialization in crops has taken place and choice 
of crops is governed less by custom and household needs and 


1. Mukerjee, Economic Problems of Modern India, VoL I, p. 295. 

2. Ibid,, p, 296. 

3. Ibid., p. 297. 



MARKETING OF AGRICULTURAL FRODUGE 137 


more by the prevailing 'prices in the distant markets. - This is 
especially the case in areas where transportand irrigation facilities 
have broken up. the self-sufficiency of the village. In these 
bigger mandis the wholesale arhtiya makes his appearance and 
facilitates grain transactions. He often supplies capital to the 
village bania or beopari on the stipulation that the produce of 
the neighbourhood would reach him regularly at harvest time. 
He also acts as a commission agent of shroffs and big exporting 
firms in the cities, thus forming an indispensable link in the 
chain of middlemen between the cultivator and the shipper- 
buyer.”^ 

The wholesale arhtiya in the market is also known as the 
pakka arhtiya. He should be distinguished from the kachha arhtiya.. 
The kachha arhtiya acts as a commission agent for all sellers in the 
country-side including cultivators, village banias and beoparis and 
other itinerant carriers. The small mandi-dealers also often 
dispose of their produce through him.^ The Pakka arhtiya never 
deals directly with the cultivator-seller. In addition to the 
arhtiyas there are other intermediaries called the dalals ” 
(brokers). “ Dalals are found in all the markets. Sometimes one 
set acts for the sellers and the other for the buyers ; but in the 
majority of the markets brokers operate in the interests of buyers 
only. It is not necessary to employ a broker but buyers generally 
do so to save themselves, time and bother. His real business is to 
put buyer and seller in touch.” ^ 

The transactions in the market take place in the following 
manner; “The beopari or the seller entrusts his goods to 
an arhtiya or ‘ dalal ’ , dealing on behalf of a purchaser. Both the 
arhtiyas put their hands under a piece of cloth,' towel, or 
handkerchief and start catching one another’s fingers under the 
same. The bargaining is usually in terms of annas, as there 
is generally no dispute about the rupee part of the price. The 
negotiations go on in this secret manner till they are called off 
owing to failure in arriving at an agreement, or a price is settled, 
and then the seller is informed of the price agreed upon.” This 
is the usual practice. In some cases produce is sold by open 
auction. In a very few mandis there are also co-operative,shop^ 
which take the place of the kachha arhtiya. These have been 
tried in the Lyallpur mandi, but did not prove a success due to 
various reasons to be noted laten 


1. Mukerj^e, Economic Problem of Moderns India, p. 302* 

2. Ibid., p. 308. 

3. Hussain, op. cit., p. 103. 

4* Ibid. 



^ EGONOMICS- OF INDIA AND PAKISTAN 


13S' 


As soon as the deal is effected, the kachha arhtiya pays cash 
to the seller, though usually he does dot get the purchase price 
from the buyer (pakka arhtiya) at once. Through the arhtiyas the 
produce is passed on to the retailers for home consumption, to 
the mills for manufacturing purposes and to the exporters for 
external trade. 

’ Cultivator 


Buyer in 

Periodical Market 

L_ 



ari 


Money-lender 


Kachha Arhtiya 
Broker 

j 

Pakka Arhtiya 


^ 

Cartman, Porter 
Banjam, etc- 


Wholesaler 


Manufacturer 


1 


Exporter 


Retailer 

Home Consumer 


The above diagram illustrates the chain of middlemen 
between the village producer on the one hand and the ultimate 
consumer of his produce on the other. The exporter may either 
buy from the pakhet arhtiya as shown in the diagram or he may 
buy through an agent from the cultivator directly or from one of 
the intermediaries between him and the kachha arhtiya. 

6. Defects of .the Present System:' The maiti defects of 
the present system of marketing in India are ; (a) Indifferent 

quality of the produce sold,- Ah) Inadequate facilities of tr^hs- 
port and . communication, (c) Multiplicity of intermediaries, 
(d) Lack of. storage arid, warehousing facilities, (e) Fraudulent 
.practices in the markets. We pfppose now to discuss each 
of these defects and also to tak'e^note of the various steps that 
have been taken by the Gpvemmen| to remedy each or some of 
them. ’ , " , 

7* Indifferent Quality of the Produce : The Indian produce 
does not enjoy good reputation in the foreign markets, though 
things have improved in recent years. The low quality of the 
produce is. due to a number of causes (0 Indifferently selected 
seed, {(i) Natural calamities affecting the crops while growing, 
like too much or too little rains, pests and, diseases, etc. (Hi) 
Primitive methods of harvesting, which lead to mixing of 



MARKETING OB ‘.AGRICULTURAL PRODUCE 139 


dirt and stones with tHe grains, (iv) Lack of proper .storagei 
facilities in thk village, which results in deterioration through^ 
exposure to rain, dirt and rats, (v) Deliberate deterioration 
at the various stages of marketing by damping, mixing, etc. (vi) 
Dack of standardization and grading of produce which does 
not distinguish between good, bad and indifferent qualities. 

The agricultural departments have done useful work in 
introducing impro\^ed varieties of seed, 'though a very large field 
has yet to be covered in this connection. The percentage of the 
total area under the various- crops which is sown with improved 
‘seed varies from about 3 per cent in the case of groundnuts 
to about 40 percent in the case of sugarcane. Taking all the 
crops together, it is still about 5 per cent of the total area sown. 
Some work also has been done to tackle the problem of pests and 
diseases. The methods of harvesting, however, remain as defec- 
tive as ever and unless mechanization is introduced (which* is 
impracticable under the, present conditions) they will remain the 
same. Storage facilities can be introduced either by individual 
or co-operative effort, but little has been done so far; The 
trouble .is that the cultivator cannot keep produce on his 
hand, for a long time, due to his financial weakness and henc^ 
troubling about constructing elaborate means of storage does not 
seem worth\yhile to him. Conscious deterioration of quality is 
partly due to pure dishonesty, but partly because the standard of 
quality for exports is fixed low and better quality produce does 
not command proportionately better prices. The seller, there- 
fore, reduces better quality products to the given standard. 
In the case of cotton, the Government has taken definite steps to 
prevent deterioration of quality in certain cotton-growing areas* 
In 1923, the Cotton Transport Act was passed which enabled any 
local Government to notify definite areas of cotton for protection 
and to prevent the importation of cotton from outside the area 
except under licence. The object was to prevent inferior outside 
cotton to get mixed with the superior variety of the. area 
protected. The Act has produced good results. To discourage 
adulteration, another Act was passed in 1925. -This was the 
Cotton Ginning and- Pressing Tactories Act. According to this 
Act, the ginsr and presses have to mark their bales distinctively in 
serial number so that any fault, if discovered, can be. traced back. 
Legislation on similar lines — suited to circumstance of the 
commodities in each case — should go a long way to prevent 
deteripration of. other agricultural products. ' Measures against 
adulteration of food do exist in various local areas, but they Lave 
not proved very effective f moreover, they only aim at protecting 
the home consumer. 



140 


ECONOMICS OF INDIA AND , PAKISTAN 


As regards grading and standardization, definite work is 
being done since the passing of the “ Agricultural Produce 
(Grading and Marking) Act ” of 1937. Under this Act, licences 
are issued to reliable merchants authorizing them to grade 
agricultural produce under the close supervision of the marketing 
staff appointed by the Government.^ Such produce is then 
placed in the market under the label and seal of “ AGMARK.” 
At first grapes, oranges, tobacco, eggs, hides and skins were 
graded in this way. Later on other commodities like ghee, atta, 
rice, apples and lac were added to the list and more can be added 
as need arises. During 1942 alone, more than Rs. 241 lakhs 
worth of produce was sold under the AGMARK ” as compared 
with Rs. 146 lakhs in 1941.^ 

8. Transport Facilities and Marketing Intelligence ; ‘‘ In 

spite of the developments of the last half century,'’ wrote the 
Royal Agricultural Commission, India must still be regarded as 
a backward country in respect both* of railways and roads.’’^ 
They are only 2*2 miles of .railway line per 100 square miles of 
area of India as compared with 227, 19*9, 12*3, 9*5 and 8*3 miles, 
respectively, in Great Britain, Germany, France, Japan and U.S.A. 
Moreover, the freight rates in India are high, which definitely 
discourage their use for transportation of agricultural produce, 
which usually has small value with a large bulk. A more sympa- 
thetic freight^ policy, cold storage facilities, introduction of 
standard containers for small parcels and packages, can consider- 
ably enhance their utility. 

As regards roads also, India is backward as compared With 
other countries. There are only 18 miles of roads per 100 square 
miles in India. Compare this with 430 in Japan, 200 in Great 
Britain, 190 in France, 120 in Germany and 100 miles in U.S.A. 
The unmetalled roads and village tracks are full of dust in the 
summer and are transformed into pools of muddy water, and 
swamps in the rainy season. No wonder the villager prefers 
selling his produce in the village. Lack of development of roads 
have been mostly due to lack of funds. A change of policy 
is necessary. So far roads have been developed out of. revenues 
only. Loans should be raised by the Provincial Governments 
for this purpose. A proper co-ordination of road and railway 

1. Indian Year Book, 1 943^44, p. 298. 

2. Report, p. 369. 

3. For instance, concession from the N.-W.R. have been secured by the 
Punjab Marketing Section of the Agricultural Development for Malta oranges, 
dispatched from grading stations to certain markets within the province and 
also in Sind^ 



MARKETING OF AGRICULTURAL PRODUCE ' 141 

services is necessary to avoid wasteful competition. As regards 
waterways, where they can be revived or improved, it should be 
done provided they will result in appreciably reducing cost 
of transport, or where no alternative means of transport are 
available. 

As regards marketing intelligence, daily market prices of 
various commodities are broadcast from the various AlUndia 
Radio stations for the information of the people, but the average 
villager still depends upon heatsay for his information in this 
connection. Advance in this connection can be made only with 
the advancement of general education and better development 
of the means of communication. 

9. Multiplicity of Intermediaries: From the diagram on 
page 138 it will appear, that here is a large number of intenne- 
diaries between the cultivator and the consumer of his produce. 
To take one particular instance of this chain, we find the follow^ 
iDg links : — 

Between the cultivator and the consumer are : 

1 2 3 4 5 

Beopari — Kachha Arhtiya — Dalai — Pakka Arhtiya-^Wholesaler — 

6 

Retailer 

There may be even more links in practice. Each of them 
gets some money as his reward. Are these all indispensable ? If 
some of these links could be eliminated, the marketing expenses 
could be reduced both to benefit the producer and the consumer. 
Some of them are dearly superfluous, e.g., the dalal. If the 
cultivator takes the produce to the market himself the beopari 
can also be eliminated. The kachha arhtiya can be displaced by 
the co-operative shop but cannot be dispensed with. The pakka 
arhtiya and the wholesaler even now are frequently one person. 
By marketing through the village cooperative sales society, the 
consumer may be approached directly. But such reforms should 
be introduced with care. The Agricultural Commission sounded 
a note of warning in this connection : “ Public opinion is 
invariably watchful and is often suspicious of the middleman. . . 

It is clear, however, that the public opinion is not fully 
informed on the costs and risks incidental to the business 
of distribution in modern conditions. We depreciate easy 
generalities suggesting that every ill from which the cultivator 
suffers is traceable to the existence of hordes of rapacious and 
unnecessary middlemen. Such statements disturb confidence, 
while distracting attention from faults in the system of marketing 



142 


ECONOMICS OF INDIA AND PAklSTAN^ 


which are capable of being remedied or removed/’^ According 
to the .Commission, ‘‘had communications and chaotic conditions 
of marketing encourage a superfluity of middlemen* . . and the 
most effective means of removing unnecessary middlemen are the 
provision of good roads and the establishment of a sufficient 
number of well-regulated markets easy of access to the cul- 
tivator/’^ 

According to another authority, “ in the present unorganized 
system of credit and marketing the itinerant beopari is a 
necessity, and he should not be condemned off hand, just like 
the village Mahajan, unless and until new and better marketing 
methods are brought to the door of every peasant.”'^ What are 
these new and better marketing methods Co-operative 
marketing is the most hopeful and useful of all* - The problem of 
Co-operative Marketing we shall consider presently'* 

10, Storage and Warehousing Facilities ; Due to the lack 
of financial reserves the cultivator sells his produce within a month 
or so of harvesting it* The only produce that he stores for any 
length of time is what he keeps for his family consumption or 
for seed. He, therefore, does not think worth his‘ while under- 
taking expenditure on expensive storage structures. He stores 
grain largely in huge earthen containers, in pots and sacks or 
underground in khattis or pits where water level is. high. Under- 
ground storage exposes the produce to' white ants, rats and 
dampness. In larger markets, agricultural produce is stored in 
kothas and khattis. Such produce may be sold several times before 
it is finally taken out. Against it (in larger mandis) advances are 
offered by shroffs and joint stock banks* But even in large markets 
grain is not stored for longer than about eight months. To hold 
stock for longer periods, the means of storage should “ be' better 
than the khattis and the kothas. In that case the practice of getting 
advances from the banks against the security of stored ‘produce 

r ^ „ 

1. Report, p. SBS. 

'2. M., p. 383-8i \ 

'3. Mukerjee, op., cit., p. 306. 

4. Dr. Muk'erjee forecasts the -following development in this connection t 
“ No doubt with better roads, and modes of transport and improved organize- 
tiom -there wiU be fewer middlemen than at present who would appropriate a 
portion of the meagre proEt of the , small holders. Thus the arhtiya will 
gradually supersede the village beopari, earner or bania, and the shroff dr the 
exporting Efm will supersede the arhtiya, or a^aih the cultivators'' themsUves, by 
c6-operative organization, may abolish, as they ate doing in some countries in the 
West, the entire chain of middlemen,* villa:ge buyers, brokers,' arhtiyas as well as 
the urban.shroffsj.who.are now Indispensable in agricultural marketing.** Ibid,.' 
D. 324. - - j . , , , . 



marketing .^F AGRICULTURAL PRODUCE 143 

will become more widely prevalent than it is now.- It is necessary, 
therefore,' to have properly constructed warehouses at the more 
important Hindis and railway stations for such constructions. 
Government, assistance and initiative are necessary. In the vilh 
9ges,,god6wns may be constructed by co-operative societies to give 
facilities for storage to the members and enable them to keep 
their produce safe, until the favourable time for selling. The 
co-operative society can combine the function of marketing 
finance with the provision of storage facilities. 

11. Fraudulent Practices in the Markets ; Another defect 
of the present system is the existence of a number of practices, 
even in well-organized markets, which defraud the cultivator- 
seller of a part of his sale price. Chief of such practices are : (i) 
the arhtiya and the dalal acting for both buyer and seller, (it) 
settlement of price under cover, ini) false weighments, and (iv) a 
variety of charges. 

(r) Some agents act for buyers .and sellers both and are called 
kachha pakka arhtiyas.^ In some cases the same person acts as a 
dalar-^ for both parties, getting commission from both sides. 
Under such conditions, the interests of the cultivator are bound 
to suffer. The mandi agent naturally acts in the interest of the 
buyer, who belongs to his own class and with whom he has con- 
stant dealings, rather than in the interest of the cultivator who 
visits the mandi only once or twice a year. 

fa) Settlement of price under cover, — We have seen how the 
mhtiyas representing the buyer and the seller negotiate the price. 
The cultivator is kept in the dark until after the settlement of 
the price. Naturally, this does not inspire confidence in the 
peasant, especially when both the arhtiyas belong to the mandi 
and usually to the same community and class. Moreover, this 
method is open to abuses. ^Such practices should be declared 
illegal. Price should be settled openly. 

iiii) False weighments, — There is a large variety of weights and 
measures prevalent in the country. In the same market sometimes 
two , sets of weights are used, one for buying and another* for 
selling. In 1913-14, a Weight and Measures Committee recom- 
mended standardization. The Agricultural Commission, while 
recognizing the difficulties of reform, due to diversity of local 
customs, recommended that an All-India inquiry should be made 
again* and .general principles laid down for the provincial govern- 
ments to adhere to, to reform this evil. Introduction of standard 


1* HossaiD, op* cit., p. 104* 
2* Ihid.t p. 280, 



144 


ECONOMICS OF INDIA AND PAKISTAN 


measures is a reform which is urgently wanted and the provincial 
governments should take this matter in hand more thoroughly 
than hitherto has been done. “ District Boards, local boards, 
village Panchayats, and municipalities may be required by legisla-’ 
tion to provide standard weights as well as weighing facilities*”^ 
The- various Marketing Acts establishing regulated markets (Berar, 
Bombay, Punjab, etc.) provide for the keeping and using only of 
standard weights and measures in such markets as we shall see 
presently. In 1928, the Central Provinces Government passed 
Weights and Measures of Capacities Act to secure standardization 
of weights and measures by notifying areas for the purposes of 
the Act. A similar Act came into force in the Bombay Presidency 
in 1935. A Standard of Weight Bill was passed by the Central 
Legislature in 1939. This will enable the provinces to introduce 
uniform weights and measures prescribed by the Act. This will 
certainly lead to more extensive and smoother. marketing of the 
produce from which both the producer and the consumer (as well 
as the middlemen) are bound to derive benefit. In the large 
markets weigh-bridges should be established over which first the 
loaded and then unloaded cart of the cultivator may be passed, 
thus checking the weighment done by the market weighment. 
This will act as a check on the malpractices of the weighmen and 
will be a source of satisfaction to the cultivator-seller. 

(rV) Market Charge ^. — One of the greatest scandals of present 
day marketing in India is the multiplicity of charges levied oh the 
seller of the produce. The total amount of such charges for 
wheat is compared below provincewise 

AVERAGE MERCHANDISING CHARGES ON^ WHEAT IN 
WHOLESALE ASSEMBLING MARKETS 
(Per 100 Rupees) 


Province 


Total paid 



Total charge 



By buyer 

By seller 


Punjab : 


Rs. a. 

p. 

Rs. a. 

P* 

Rs. a. p. 

Canal colony* 

Non-c 'lony 


, 0 13 

10 

2 0 

9 

2 14 7 


r 10 

8 

1 7 

2 

3 1 10 

United Province ; 
Western 


1 8 

2 

1 7 

4 

2 15 6 

Centrkl and Eastern ; 


1 2 

8 

3 4 

8 

4 7 4 

Central Provinces ... 

... 

0 5 

8 

„ 3 12 

2 

4 1 10 

Bihar and Orissa ; 


- 1 8 

9 

1 15 

9 

3 8,6 

Bombay ; 


2 7 

1 

1 11 

11 

4 3 0 

Sind 

... 

1 1 

6 

3 1 

0 

4 2 6 

Average for India . 


1 5 

3 

2 5 

7 

3 10 10 


L Mukerjee, op. cit-, p. 304. . . 

2. Based on Appendix XXX, p. 405, of thi Report on- the Marketing of 

wry i T 4 *^ 



MARKETING OF AGRICULTURAL PRODUCE 145 


Note the high amount of the charge and the fact that in 
almost every case the seller pays more than the buyer. The charge 
on the seller is especially high in the Central Provinces, the 
United Provinces— Eastern and Central markets— Sind and the 
Punjab Colony markets. 

These charges are the sum total of a large number of items 
which are detailed in the following table. The figures refer to 
the Lyallpur Mandi in the Punjab.^ To show how much saving 
could be effected by selling through the co-operative shop, figures 
are also given relating to charges made by such a shop^® in .the 
same mandi. 


SELLERS EXPENSES IN THE LYALLPUR MANDI 
(Per Rs. 100 of sale) 


items 

Local shops 

Co-operative^ 
Commission 
-Shop, Ltd, 


Rs. a. ph 

Rs. a. 

L— Commission ••• 

0 12 6 

-0 8 6 

2 — Palledari (porterage) ... •• 

0 3 9 

0 3 9 

3. — Total (weighment) 

0 3 9 

0 3 9 

4. — Chungi (paid to buyer’s servant) ... 

0 1 3 

0 i 3 

5. — Brokerage (to buyer’s dalal> 

0 13 

0 13 

6. — Shagirdi (to arhatis* apprentice) 

0 1 3 

-Nil 

7.— Dharmao (Charity) ... 

0 1 3 

m 

8.— Gaoshala (Charity) ... 

0 0 3 

0 0 3 

9. — Changar (sundry payments in kind) 

0 12 3 

0 3 6 

Total 

2 5 6 

1 6 3 


By selling thfough the commission shop the sellet cm. 

Re, 0-15-3 per cent. Some of these charges are made for services i 
done, while others are unreasonable impositions ; for instance ^ 
Nos. 4, 5, 6,' 8 and many of the charges in No. 9. Why i 
should the seller pay to the buyers’ servant, his japprentice, 
his d!alal and Vis charitable activities'? The commission charged is 


1. Hussain, op. cit., p 128* 

2 SsL 3. The Co-operative Corntnission Shop statted in 1919 undertakes 
business on behalf of members as well as non-members. 



146 ECONOMICS OF INDIA AND PAKISTAN 

also 50 per cent liigher than that of the co-operative shop.^ It 
is necessary that superfluous charges be made illegal and other 
charges should be made uniform. Attempts have been made to 
achieve this object in the regulated markets as we shall see. 

Mention may here also be made of another set of charges 
made from the seller, not in the market, but before he enters the 
market town. These are octroi duties, terminal taxes and tolls. 
According to the Wheat Report, these amount sometime to 4 or 
5 per cent of the value of the produce and arc generally paid by 
the cultivator. “ In theory of course,” says the report, “ the 
octroi duty should be payable by the consumers in the town in 
the form of enhanced prices, but owing to the fact that they are 
in the first instance paid by the cultivator-seller, who has no 
alternative but to let the charges come altogether out of his 
pocket. Considering the fact that the amount of octroi collected 
in the course of the year by municipalities amounts to over Rs. 1*5 
crores, the fairness of the incidence of this tax is a matter for 
serious investigation.”^ 

The Wheat Report in fact contends that even the charges 
levied on the buyer in the first instance are shifted on to the 
seller by forces of competition,^ through reduction in price paid 
to him. “ All octroi duties, terminal taxes, tolls, market charges 
and charities paid on the wheat between the cultivator and the 
consumer, are inevitably forced back (the upper limit of price 
being <fixed already by competition) on to the cultivator, who is 
willy nilly compelled to pay for the upkeep of municipal roads 
and other amenities of the town through octroi and similar 
duties. He also pays by way of charities, in many cases for 
educating the urban children and for maintaining other charitable 
institutions from which he hirnself derives no direct benefit 

1. The commission shops, however, have not proved such a success as one 
would expect. Their development is hampered by many difficulties. ** They 
make little appeal to the small peasants, the majority of whom do not sell in the 
markets The members are lukewarm in their support, and do not always use 
the co-operative agency for the sale of their goods. There are management 
troubles too ; it is very hard to get reliable and experienced staff in the existing 
grades of salaries. Again, many growers and beoparis are either indebted to, 
or have accepted advances from, the arhtiyas f and quite often there are old- 
established relations between them* So the sellers from the country-side, as 
also the agents of the merchants in the " mandis,” take their produce to the 
'* arhtiyas** rather than the co-operative institutions. These factors combine 
against* the commission shops doing greater business. Nevertheless their financial 
position seems to be sound, and sales are increasing steadily.” Hussain, op. 
cit , p. 129. 

2. Report, p. 175. 

3. Ibid,, p. 288-89. 



MARKETING , OF- AGRICULTURAL PRODUCE 147 

12. Regulated Markets : Mainly two great reforms are usually 
suggested to save the ' cultivator from the oppressions of the 
present system. One is the establishment, all over the country, 
of regulated markets on the Berar and Bombay model, and the 
other is the marketing of produce through the cultivator s own 
co-operative societies formed for "this purpose. We shall now 
consider these two proposals, which have already to some extent 
been put into practice. 

The first provision for the establishment of regulated markets 
was made by the Berar Cotton and Grain Market Lkw of 1897. 
It vested the management of such markets in an elected com- 
mittee representing the people living in the area served by the 
various markets and of the local authorities. Arhtiyas were to be 
registered and the weighmen and dalals to be licensed; unlawful 
deductions were prohibited and only*standard weights were to be 
used. Penalties were fixed for breach of law. The Agricultural 
Commission recommended establishment of similar markets for 
other areas and other commodities. Bombay modelled its Cotton 
Markets Act of 1927 on the Berar Law with some improvements. 
This latter was replaced following the enactment in 1930 of 
more comprehensive laws^the Bombay Agricultural Produce 
Markets Act. Similar laws have been passed in Hyderabad State 
(1930), Madras (1933), Central Provinces (1935), Mysore (1939), 
N.-W.F.P. (1939) and Punjab (1939). In essentials all these laws 
resemble each other. A fe\y words may be said about the Punjab 
Agriculture Produce Markets Act. 

The main features of this Act. are as follows : — 

(a) A Market Committee will be set up in each market area 
to ensure honest dealings .between buyers and sellers and to 
generally administer the market. The Committee will represent 
the various interests-^the growers, commission agents, traders, 
etc. Members will ‘‘ be selected by the Government from among 
the prescribed'^ panel of names submitted by the non-official 
members of the district board of the district in which the markel 
area is situated and by the traders in the market."’ 

(b) The Market Committee will standardize the variou 
market practices and charges ; would keep standard weights, wil 
see that, the same broker deos not represent both buyer an( 
seller ; and perform similar other functions ensuring fair play ii 
dealings. In cases of dispute, the Committee will provide arbi 
tratibn facilities. : . . 

(c) The Act provides for the licensing of brokers and weigB 
men and prescribes penalties for breach of law. 



148 


ECONOMICS OF INDIA AND PAKISTAN 


This guarantee of fair-play for the peasant in the market is 
bound to encourage him to take his produce for sale there, 

13, Co-operative Marketing : In theory, a multitude of 

advantages are claimed for co-operative marketing : “ Improved 

marketability of goods, possibilities of developing markets (by 
means of advertising), stabilizing of production, controlling the 
flow of the supplies, increased bargaining power of the growers, 
reduced costs and more efficient service, ability to finance the 
marketing and producing operations of the members and 
so on/’^ 

’ Co-operative marketing has met with great success in Europe 
and America, In India, beginnings have already been made in 
several provinces. In Bombay, sale societies for cotton are doing 
well Co-operative cotton sale societies have also been started in 
the Central Provinces, Madras and the Punjab. The principle of 
co-operative sale has been extended to gur, tobacco, chillies, 
paddy, areca nut, and potatoes. Experiments made in Bengal in 
the sale of jute and paddy have not met with success. Sale 
societies in Madras too have not made much progress. The 
movement, however, has struck root in Bombay where cotton 
growers have reaped considerable benefits. In United Provinces, 
societies for the sale of sugarcane are making rapid progress, so 
are the ghee sale societies. Potatoes, cereals and fruit are also 
being tackled in the same way with success. In Bihar, cane 
growers’ societies are being formed. In other provinces the 
movement has not made notable success. The causes of the lack 
of progress are many ; It is only the complexity of the working 
of co-perative sale societies, the difficulty of providing for 
marketing finance, the lack of expert knowledge on the part of 
co-operative officials and the lack of godown and storage facility 
that have prevented the rapid multiplication of sale societies and 
their efficient working.”^ 

The new marketing organization established by the Central 
and Provincial Governments is expected to stimulate co-operative 
marketing. 

14. The New Marketing Organization • The Agricultural 
Commission had recommended the appointment of expert 
marketing officers and carrying out of marketing surveys of the 
various commodities. The Government, however, delayed the 

1. S, Kartar Singh, “ Marketing of Agricultural Produce in the PunjaW^ 
an aiticle m Ganga, Februaw 1940. p. 38. 

2. Hussain, op. cit., 296, 

3. Indian Year ©p. cit, p, 382. 



MARKETING OF AGRICULTURAL PRODUCE 149 


matter due to financial stringency until in April 1934, Mr. A. M. 
Livingstone was appointed Agricultural Marketing Adviser to the 
Imperial Council of Agricultural Research. The Provincial 
Economic Conference of April 1934 also agreed on the develop- 
ment of marketing facilities and recommended action on the 
following lines : (0 Propaganda and supply of information in 
external markets regarding Indian products ; \ii) The grading, 
storing and bulking of the main staple products, special market 
organization for perishable commodities; (/i/) Informaticn to Indian's 
producers of consumers’ requirements both in India and abroad, 
(iv) The planning of production on basis of quality and demand, 
(i;) The establishment and development of regulated markets; (vi) 
The undertaking of market surveys for the purpose of developing 
a common plan throughout India; and (vli) The establishment of 
properly organized “future” markets, commodity exchanges and 
warehouses. 

The Government of India, in their resolution of 8th May, 
1939, outlined their policy on the lines recommended by the 
conference. This policy is to be carried out in collaboration with 
the Provinces and the States through the agency of a Provincial 
and Central Marketing staff which has been appointed. The 
central staff consists of the Agricultural Marketing Adviser, three 
Senior Marketing Officers, three Marketing Offcers, one Supervis- 
ing Officer for experimental grading and packing stations and 
twelve Assistant Marketing Officers. The provincial staff include 
a Chief Marketing Officer and Assistant Marketing Officers. 

The work of this staff falls into three divisions : (/) 
Investigation ; (ii) Development ; and (ni) Grading. Investi- 
gation work includes carrying on of marketing surveys of impor- 
tant commodities, problems of regulated markets, transportation, 
storage, etc. Development work will mostly depend upon the 
results of surveys. It, however, includes keeping the producer 
and trader in touch with consumers’ requirements and populari- 
zation of standard grades and containers. The work of grading 
is technical and relates to the chemical and physical properties of 
products to be graded like oil seeds, grains, fruit, etc. 

15, The New Organization’s Achievements ; The new 

marketing organization has done good work since its establish- 
ment. Its achievements are summarized below * — 

(0 Marketing surveys of a large number of commodities have 
been accomplished and reports of such surveys have been pub- 
lished. The chief commodities surveyed are : rice, wheat, linseed, 



150 


ECONOMICS OF INDIA AND PAKISFAN 


groundnuts, tobacco, coffee, fruit, milk, eggs, livestock, hides and 
skins, etc* 

(a) The surveys revealed the necessity for grading due to the 
sale of mixed produce of doubtful quality that was going on* 
There was thus a case for grading agricultural produce. To this 
end the Agricultural Produce (Grading and Marketing) Act was 
passed in February 1937, We have already noted the work done 
under this Act. On account of grading of the produce, goods, 
especially perishable goods (eggs, fruits, etc.), secure better prices 
than before. 

(m) Progress has also been made with respect to standardisa- 
tion of contract terms (for white wheat, linseed and groundnuts) 
thus widening their marketing field. 

(iv) Finally, arrangements have been made for market news 
service. This is done by weekly broadcasts from the All-India 
Badio, Delhi, regarding prices, stocks and movements of certain 
staple commodities. Daily closing rates are also broadcast from 
some other Radio Stations like Lahore in the rural programme* 
The Provincial Marketing Officers are taking steps to further 
improve marketing news services. 

A Ministers* Conference on Agricultural Marketing was held 
in New Delhi in 194L It recognized the need for slowing survey 
work and accelerating developmental work. Among other things 
the conference favoured the establisliment of an organization for 
the purpose of investigating the possibility of adjusting India’s 
export trade in primary products to war conditions. 



CHAPTER VII 

RURAL FINANCE AND INDEBTEDNESS 


1. Introduction ; Fifty years ago (in 1895), Sir F.A. Nicholson 
wrote in his famous Report on Land and Agricultural Banks: 
“The lesson of universal history from Rome to Scotland is that 
an essential of agriculture is credit. Neither the condition of the 
country, nor the nature of the land tenure, nor the position of 
agriculture affects the one great fact, that the agriculturist must 
borrow.” In fact every modern business worth the name is run 
on credit or borrowed money. Agriculture, however, gives rise 
to certain peculiar problems of finance because of its uncertainties, 
its comparatively small unit of production, scattered nature of its 
operations, and the conservative character of the peasants. These 
characteristics are still more prominent in India due to small 
holdings, the illiteracy of the peasant, his lack of forethought and 
subservience to age-old custom and out of date tradition. This 
accounts for the fact that the problem of rural finance has become 
primarily the problem of rural “ indebtedness.” The latter word 
conveys something more than merely borrowing for productive 
purposes. No doubt our cultivator does need money to make 
improvements in land, to replace his used up implements and for 
current expenses on seed, manure and especially for the purchase 
of cattle. But it happens that actually the capital invested in his 
farm for these purposes is very small^ indeed. Most of his indeb- 
tedness is due to unproductive® expenditure in the past. It should 
be noted that unproductive expenditure is not necessarily (though 
in many cases it is) unjustifiable expenditure. For instance, 
expenditure due to a natural calamity (e.g., famine, or frequent 
cattle mortality) may be quite essential, but it will be unproduc- 
tive all the same. Money borrowed for purely productive 
purposes, e.g., sinking of wells, buying improved seed, constructing 
embankments, etc.) does not in the long run lead to indebtedness 
because the profitable use of the money leads to its repayment. 


1. Roughly Rs 30 per acre is considered sufficient capital in the Punjab — a 
comparatively prosperous province in Agriculture- ^15 is required in Britain. 
Trcvaskis, The Punjab Today, Vol II, p. 323. 

2. According to the Provincial Banking Enquiry Committees 70 per cent 
of the debt in United Provinces, Bengal and Bombay was contracted for unpro* 
ductive purposes ; 60 per cent in Madras was for similar purposes. 



152 


ECONOMICS OF INDIA AND PAKISTAN 


The problem of rural finance, therefore, must be faced from three 
points of view : (a) Reduction and, if possible, elimination of 
the existing burden of debt* (b) Discouragement of future 
unproductive borrowing* (c) Encouragement of productive 
borrowing. 

Our study, therefore, will follow three lines of investigation : 
(0 What are the legitimate needs of the peasant for credit as 
an agricultural producer ? How have these needs been met so 
far, and with what consequences ? (ii) What factors have brought 
about the state of indebtedness of the peasantry and what is the 
magnitude, of this indebtedness. (Hi) What remedies have so far 
been applied to reduce old debts and to discourage unproductive 
borrowings ? What should be the future programme to achieve 
the three objects given under (a), (b) and (c) above 1 

2, Lgitimate Needs of the Peasant : The peasant requires 
three types of credit to carry on successfully the agricultural 
operations 

(a) Long-term credit for expenditure on permanent improve- 
ments. — This involves investment of capital in the construction 
of wells, tanks, construction of bunds and embankments, digging 
of channels to divert the water of rivers, terracing of hillsides, 
clearing of jungle, drainage, reclamation, fencing etc* The larger 
irrigation works are constructed by the State and need not be 
mentioned here* The finance required on other items of such 
expenditure “ is usually provided by the cultivator himself from 
his own savings or from funds raised by borrowing, but the State 
has long recognised as one of its duties the encouragement of 
such improvements by the grant of loans at a rate of interest as 
low as conditions permit*’’^ Of this we shall speak later. 

(b) Intermediate credit, — This he requires tfor he purchase of 
more expensive implements, cattle and sometimes for the 
erection of buildings* 

(c) Short-term Credit— In addition to the above, the agricuT 
turisr requires' money for financing his current requirements, like 
the purchase of seed, fertilizers, feeding staff, etc. 

' The greater proportion of the funds required for general 
agricultural purposes are supplied by the local money-lenders. 
The money-lender also supplies him credit for domestic needs 
and for expenditure on social ceremonies, which we have called 
unproductive* ‘‘ The money-lendet fecognizes no distinction 

*• ^ "nculfural CoHunis&iQn Report, p. 416. 



RURAL FINANCE AND INDEBTEDNESS 153 

between the capital required to finance an industry and the money 
needed for ordinary household expenditure. Every thing goes 
down in a common account. The borrower also falls to dis- 
tinguish in his own mind between sums borrowed for productive 
purposes, from the expenditure of which a more than equivalent 
return is to be expected, and those taken for current needs which 
a more prudent man would meet from savings or income. The 
result is financial confusion and widespread indebtedness.’' ^ 

3. Magnitude of Rural Indebtedness : What is the extent 
of this indebtedness ? Let us answer this question before analys- 
ing the factors that have brought it about. Estimates have been 
made, on the basis of local enquiries undertaken from time to 
time, as to the extent of agricultural indebtedness in India. One 
of the earliest was in 1875 by the Deccan Riots Commission. 
Their estimate related to twevle villages in the Ahmadangar 
district (Bombay). The Commission found that J of the occupants, 
were involved in debt which was about 18 times the revenue 
assessment, average debt per occupant being Rs. 371. In 1880, the 
Famine Commission expressed the view that I of the land hold- 
ing classes in India were deeply in debt and an equal proportion 
were in debt but not beyond the power of recovering themselves. 
Sir F, Nicholson in 1895 estimated the total rural debt of Madras 
at Rs. 45 crores and on this basis Sir Edward Maclagan estimated 
that in 1911 the total rural debt in British India was Rs. 300 
crores. 

The next important enquiry was that of Mr. (now Sir) M. L. 
Darling, I.C.S. He based his calculations on data relating to 
55,308 members of 2,106 co-oprative societies in the Punjab in 
the year 1918-19. He concluded that the total agricultural debt 
of the province was Rs. 90 crores, that it averaged Rs. 31 per 
cultivated acre, Rs. 76 per head of the agriculturist population 
and that it was at least 19 times the land revenue demand. In 
the case of proprietors, the debt, according to Mr. Darling, was 
equal to three years' net income of their land. The average debt 
per indebted proprietor was Rs. 463, but per indebted tenant it 
was only Rs. 150. On the basis of the Punjab figures, Mr. Darling 
calculated that the total agricultural debt of British India 
(including Burma) was not less than Rs. 600 crores or £400 
million.^ 

The most recent and authoritative estimates have been rm^e 
by the various Provincial Banking Enquiry Committees 1930). 

1. Agricultural Commission Report, p. 417. 

2. Darling, Punjab Peasant in Prosperity and Debt^ p. 20-21. 



154 ECONOMICS OF INDIA AND PAKISTAN 

Theit estimates are tabulated below : 


Province 

Total debt 

Average pet 

Value of total 


Crorea 

agriculturist 

Rs. 

production, 
principal crops, 
1928-29 
Crores 

Madras 

... 150 

50 

180 7 

Bombay 

81 

49 

' 120*5 

Bengal 

100 

31 

232*5 

U. P. 

124 

36 

140*5 

C. P. 

36 

30 

68 7 

Punjab 

135 

92 

76-7 

Bihar and Orissa 

155 

31 

135*7 

Assam 

22 

31 

. 4 . 

Total British India 
(Burma excluded) 

803 

• •• 

954-3 

Value of production in 1932-33-545 2 


Note the heaviness of the debt in the Punjab. It is the 
biggest per agriculturist and is almost double the value of her prin- 
cipal crops on the basis of 1928-29 prices. During the depression 
the prices fell on the average by about 50 per cent and hence the 
burden of the rural debt in India even assuming that no new 
debt wasi incurred must have doubled. According to Dr, P.J. 
Thomas,^ by 1933, the real burden must have reached Rs. 2,200 
crorcs. In recent years prices of agricultural products have 
advanced considerably due to war and the burden of the debt 
may be regarded as having been correspondingly reduced. But it 
would be misleading to generalize without adequate data. The 
rise in prices has mostly benefited the larger landlords who have 
surpluses to sell. The ordinary peasant has suffered more from 
inflation than he has gained. Only a detailed investigation could 
show the real effects of the war on rural indebtedness. We 
understand the Reserve Bank is undertaking such an investigation. 
Its findings should prove valuable. 

It is, however, not so much the amount of debt that is serious 
as the fact that most of this debt was undertaken for unproduc- 
tive purposes. According to the respective Banking Enquiry 
Committees, the percentage of unproductive debt to total debt in 
U.P., Bengal and Bombay was about 70 per cent and in Madras 60 
per cent. According to Darling, only 5 per cent of the debt in the 
Punjab was incurred for land improvement. 

4. Causes of Indebtedness ; For a debt to arise, the follow- 
ing conditions must be present ; — 

(a) Existence of borrowers with necessity to borrow and 
security, material or personal, to offer, 

1- Economic Frohkms of Modern India, op. cit.j p. 176. 



RURAL FINANCE AND INDEBTEDNESS 155 

' (h) Existence of lenders with capital to lend and willingness 
to lend* The willingness of the lender to lend will depend upon, 
(0 the security offered by the borrower which is acceptable, and 
{ii) the existence of law and courts to which recourse may be had 
to realize the money in case the borrower refuses to pay. 

In the light of the above, it will be easily understood why 
indebtedness was not a serious problem before the establishment 
of the British rule. The borrowers’ necessity has always existed 
in India. “We have found no reason to believe,” wrote, the 
Famine Commission in 1880, “ that the agricultural population of 
India has at any known period of history been generally free from 
debt.” But the indebtedness could not have been very serious in 
pre-British days. This was because (a) “ there was little accumu- 
lation of capital to lend ; (b) there was little surplus from which a 
loan could be repaid ; (c) there was practically no security to offer ; 
and (d) there were no sure means of enforcing recovery against a re- 
calcitrant borrower.”^ There was little capital to lend because there 
was little trade activity in the absence of means of transport and 
internal security. There was little surplus for repayment of loans 
because of the heavy demand of land revenue. There was no 
security to offer because the rights of ownership in land were 
neither valuable (because it produced no surplus) nor definitely 
recognized and enforced. Finally, there were no regular courts to 
enforce contracts between the debtor and the creditor. 

The advent of the British rule, in due course, changed all this 
in the Punjab and elsewhere in India. “ The land from being a' 
burden entailing the satisfaction of a crushing State demand 
became a valuable property, improved communications opened up 
markets for the sale of surplus produce ... property of all kinds 
rose rapidly in value. ‘ Further, the introduction of fixed laws and 
the general security following on the enforcement of order 
rendered the land available as the ultimate security for loans. 
Another factor of great importance was the growth of a money 
economy and the increase of wealth as trade developed.”^ The 
Famine Commission wrote in 1880 — “ Now, with value of land 
risen, rights defined and recorded, money-lenders have lent more 
freely on the security of ascertained interest in land , . . There is 
everywhere a serious amount of agricultural debt, and, at any rate, 
there is . everywhere the habit of running accounts with the 
money-lenders which always slide into debt when a crop is lost, 
or a bullock has to be replaced.” 

Thus the advent of British rule, increased the opportunities o( 
borrowing and lending. But what about the necessities which 


1. Calvert, op. cit., p. 244. 

2. lbid>t p. 248. 



156 


ECONOMICS OF INDIA AND PAKISTAN 


compel a peasant to borrow. They have always existed and on 
account of the greater pressure on land have been accentuated with 
the passage of time* Some of the “ necessities” are not economic 
but social Those latter with the peasant’s inherent extravagance 
and improvidence (these in turn are due to historical and political 
causes) have contributed considerably to make the burden of debt 
more serious than it might have been if mere economic necessity 
was the compelling force. 

may summarize the causes of indebtedness of the peasant 
in the words of Mr. Darling. What he has said about the Punjab 
applies equally to the rest of India. 

There are four main reasons why the peasant proprietor is 
obliged to borrow : — 

L The-small size of his holding and the way it is split up, 
conditions which make it almost impossible for him to live with- 
out getting into debt, unless he is exceptionally frugal and indus- 
trious, or has some extraneous source of income ; 

2. His constantly recurring losses of cattle from drought and 
disease ; 

3. His ingrained improvidence, the effects of which are 
greatly aggravated by insecurity of crops ; and 

.4. His extravagant expenditure upon marriage and other 
domestic ceremonies. 

In addition there are two causes which make borrowing easy, 
namely ; — 

(1) The money-lender and his vicious system of business, and 

(2) The great expansion of credit due to high prices and 
inflated value of land.”^ 

’ A word may be said about the vicious system” of the 
ixioncy -lender. This refers to his malpractices which are much less 
common today than they 'were 50 years ago, due to greater 
acuteness of the peasant and legislative regulation of the money- 
lender’s activities. One quotation will give some idea of their 
nature*; Speaking in the Governor-General’s Council in 1879 
supporting the Deccan Relief Act, Sir Thomas Hope said ; ‘‘ That 
the money-lenders do obtain bonds on false pretences ; enter in 
them sums larger than agreed upon ; deduct extortionate pre- 
miums ; give no receipt for payments an4 then deny them; credit 
produce at fraudulent prices ; retain liquidated ponds for sums 


D Darling, Punjab Peasant in Prosperity and Debt ^ 2^, 



RURAL FINANCE AND INDEBTEI>NESS 


157 


not advanced ; charge interest unstipulated for, over-calculated 
or in contravention of Hindu Law, and commit a score of other 
rogueries — these are facts proved by evidence so overwhelming 
that I scarcely know what to quote out of the five volumes com- 
posing the Report of the Commission/’^ 

Many of these practices have disappeared, but the burden of 
the old debt contracted under these conditions still lies as a dead- 
weight on the shoulders of the Indian peasantry. Hence the 
relevance of the quotation even in the contemporary debt 
situation. 

5. Land Revenue as Cause of Debt ; Before concluding 
this discussion of causes, a few words may be said about a contro- 
versial topic, namely, how far land revenue is a cause of rural 
indebtedness. To what extent the present land revenue demand 
is fair, is a topic which we shall discuss in a subsequent chapter. 
Here we are only concerned with the degree to which land 
revenue is responsible for the cultivator getting into debt 

Mr. Thorburn found in 1896, that 12 per cent of the debt 
was borrowed to pay land revenue in the area of his enquiry in 
the Punjab. Punjab Co-operative Societies Reports show that 
about 15 per cent of the money is advanced for the object of land 
revenue payment. According to Mr. Thorburnland revenue was 
rarely an original cause of debt/’ Mr. Darling also supports the 
view that land revenue ‘‘is not an important cause of debt.”^ 
According to him, land revenue payment may often be an “occasion 
for borrowing” but it is not “a primary cause of debt.” “When 
it is remembered,” he adds, “ that land revenue averages only 
Re. 1-11-0 per cultivated acre against Rs. 31 in the case of debt, 
and that in interest alone the cultivator has every year to pay 
nearly three times the whole land revenue of the province, the 
only ground for surprise is that anyone should ever have consider- 
ed it a serious case of debt/’"^ Mr. Calvert is of the view that in 
the Punjab, in earlier days of British administration, when land 
revenue was rigidly fixed and realized, it was a reason which 
induced the cultivator to borrow. “ From 1882 onwards,” he 
adds, “ successive steps have been taken to render the system 
more elastic and mote adaptable to the variations in the 
harvests.”^ 


1. ■ Quoted by Darling, op cit.. p. 224- For further details of the money- 
endePs system, read Darling’s Punjab Peasant, Chapter X* 

2. Darling, op. cit«, p. 19. 

3. Ibid., p. 251. 

4* Calvert, op. cit.,* p. 258. 



158 ECONOMICS OF INDIA AND PAKISTAN 

We may conclude, therefore, that though in the past the 
land revenue acted oppressively on the peasantry, and though 
even now the system may be open to criticism, it cannot be 
regarded as a serious cause of indebtedness* 

6. Consequences of Indebtedness : When an agriculturist 
borrows money for productive purposes, the result is increased 
prosperity for him. The productive capacity of his land is 
enhanced and the debt becomes a blessing for him. But when 
the money is spent on unproductive expenditure, as most of the 
money borrowed by the Indian peasant is spent, the debt becomes 
a standing curse to him. It leads to serious economic, social and 
moral consequences. 

(0 Economic Consequences. — Indebtedness leads to agricultural 
inefficiency. When the cultivator finds that all his additional 
efforts merely fill the pockets of his creditor, he loses all interest 
irx improving his position by greater effort and improved methods 
of production. Productivity of land thus decreases. If the debt 
involves mortgaging and finally sale of landed property, the 
result is increase in tenant cultivation and increase in the number 
of landless labourers. Both of these developments do not conduce 
to agricultural progress and prosperity. In the- marketing of his 
produce also the peasant suffers if he is a debtor to the bania or 
the middleman. He usually has to sell his produce to his creditor 
on the latter’ s terms. This means not only lower monetary returns 
to the debtor, but it also acts as a serious barrier in the way of 
improvement of marketing methods through co-operative sales, 
etc. No agricultural progress is possible for an indebted peasantry* 

00 Social Consequences , — Class friction arises between the 
creditor and debtor classes. The increase of a landless class with 
no avenues of employment creates social discontent and political 
agitation. Statistics show that landless labourers are on the 
increase in India. In 1921, they were 291 for every 1,000 ordinary 
cultivators, in 1931 their number increased to 407 per 1,000 
cultivators. 

(Hi) Moral Consequences.— These. are the. worst. The cultivator 
loses his ancestral property and in many cases with it his econo- 
mic freedom. In certain provinces cases exist of such servitude. 
In some of the south-western areas of the Punjab (Ntuzaffargarh 
district), the tenants are practically slaves of their landlords and 
are -thoroughly exploited. In Bihar and Orissa, Kamiauti^ agree- 


1. Kamiauti agreements were declared illegal by an Act in 1920» “But it 
would appear/^ wrote the Agricultural Commission, “ that the Kamia is too 
poor to set the law in motion and that Act has proved ineffective ” Report p. 
435. Read also details of the Kamiauti System, same Report, p. 434-35. 



; RURAL FINANCE AND INDEBTEDNESS 


159 


ments and in Madras the' Pannaiyal system, have created condi- 
tions of practical servitude for the labourers, “ In both cases,’' says 
Prof, P, J, Thomas, “ a labourer borrows a small sum of money to 
celebrate a wedding or funeral, bur in return he has to work for 
the lender, receiving a bare pittance for his livelihood. He can 
never be expected. to save up the amount needed, and, therefore, 
the transaction.becomes an indenture for life.”^ A similar system 
prevails in the Central Provinces, where a debtor has to render 
service to the creditor with or without payment for a fixed 
period, 

7. Remedies — Old Debts : As already noted, three-fold 
measures are necessary to meet the situation created by the 
indebtedness of the cultivators : — 

(0 Settlement of old debts. 

(ii) Prevention of new unproductive borrowing. 

(fa) Encouragement of borrowing for productive purposes 
only, by creating new credit agencies and regulating the old. 

It is obvious that unless the crushing burden of the existing 
(mostly ancestral) debt is reduced, there is no hope of any future 
reform or agricultural advancement, “ The ancestral debt has 
accumulated because of the ignorance of the peasant of the legal 
position, that debts of the deceased can pass on to his heirs only 
to the extent of the property inherited by the latter,” One 
remedy is to declare the debtor insolvent where his assets 
fall short of his liabilities. “ No one desires to see a wholesale 
resort to insolvency,” wrote the Royal Agricultural Commission, 
“and no one, we trust, desires to witness a continuation of 
a system under which innumerable people are borri in debt, live 
in debt and die in debt, passing on their burdens to those who 
follow.”^ The Central Barxking Enquiry Committee agreed with 
this view and suggested certain special provisions in the proposed 
Rural Insolvency Act, 

In some provinces, legislation has been passed in recent years 
which includes provisions for declaration of insolvency under 
certain conditions and also for the reduction and settlement of 
old debts, on equitable basis for both parties. These measures 
aim at : — 

(a) Liquidation of debts where necessary: 

Qy) Conciliation of debts where practicable. 


1, Mukerjee, Economic Problems of Modern India, Vol. I, p. 1 72. 

2. Report, p. 440-41, 



160 


ECONOMICS OF^iNDIA AND FAlCISTAN 


(d) Compulsory scaling down or licluidation . — SucE measures are 
contained in : The Madras Agriculturists Relief Act (1938) ; The 
Central Provinces and Berar Relief of Indebtedness Act (1939) ; 
The Bombay Agricultural Debtors Relief Act (1939); The U.P* 
Agriculturist Debt Redemption Act (1939). Some Indian States 
like Bhavanagar, Mysore and Travancore have also adopted 
similar measures. In Bhavanagar striking success was achieved. 
The debts after having been scaled down were taken over by the 
Durbar, who paid off the creditors. The debt is being realized 
from the peasants in small instalments along with land revenue. 

It is not possible here to describe in any detail, the methods 
adopted in all the above legislative measures. Only the central 
ideas of each may be noted : 

The Madras Act was the most radical and was the first of the 
series. As a result of it, arrears of interest outstanding on 
October 1, 1937, were wiped out, only the principal had to be 
paid. From that date up to October 31, 1937, debts incurred 
were to pay 5 per cent interest. In future debts the role of 
damdupat^ was to be applied. The maximum legal rate was fixed 
at 6| per cent, but it could be, altered by Provincial Governments. 

The CP. and Berar Act provided for Debt Relief Courts in 
place of the Old Debt Conciliation Boards, and gave graded 
relief to the debtor based on the estimated fall in the value of 
land in respect of the principal of the debt as follows ; — 30 
per cent reduction in the case of debts prior to December 31, 
1925 ; 20 per cent in the case of debts incurred after December 
31, 1925, but before December 31, 1929 ,* and 15 per cent in the- 
gase of debts incurred after December 31, 1929, but before 
December 31, 1931. No relief is provided for debts incurred 
subsequent to December 31, 1931. 

The Bombay Act has only been enforced in a few talukas as 
an experimental measure. ' It aims at reducing indebtedness of 
genuine agriculturists only. The scheme provides compulsory 
scaling down of debts through Debt Adjustment Boards cons- 
tituted for this purpose. These Boards work under Civil 
Courts. The reduced debt is to be paid by easy instalments. 
Only cultivating agriculturists whose debt, on January 1, 1939 
was not more than Rs. 15,000 are to receive relief. Graded 
relief is provided in respect of principal and interest. 


1. Under this principle, the total liability of the debtor is not allowed to 
exceed double the sura borrowed, i.e., total interest paid cannot exceed the tot^I 

■n-ritirtnal hnrrowpd- 



RURAL FINANCB AND INDEBTEDNESS ^ 161 

According to the U* P. Act the creditor is to be paid not 
more than twice the amount of the principal borrowed, minus all 
the payments received by him from the debtor in the past in 
connection with the transaction under consideration. 

(h) Debt Conciliation Legislation . — Conciliation involves volun- 
tary settlement' between the debtor and* the creditor, with the 
help of specially constituted Conciliation Boards. Legislation in 
this connection is largely based on the recommendations of the 
Central Banking Enquiry Committee and was specially necessi- 
tated by the disastrous fall in agricultural prices during the 
Depression. The lead was given in this type of legislation by the 
Central Provinces which passed the Debt Conciliation Act in 
1933. This was followed by the Punjab (Relief of Indebtedness 
Act, 1934), Bengal (Agricultural Debtors Act, 1935), Assam 
(Debt Conciliation Act, 1935), Madras (Debt Conciliation Act, 
1936) and Sind (Debt Conciliation Act, 1939). 

Though differing in details all these measures have certain 
common features which may be noted. 

They all provide for the establishment of Debt Conciliation 
Boards of from 3 to 9 members, representing the class of debtor’s 
and creditors respectively. The chairman is an executive or 
a judicial officer of the Government. Their jurisdiction is 
limited in certain provinces. In the Punjab the limit is Rs. 
10,000. Co-operative debts are excluded from their jurisdiction 
in the Punjab, but they can be included in the C. P. and Madras 
with the approval of the Registrar Co-operative Societies. 

The general procedure is that a debtor or any of his creditors 
may apply to the Board, appointed for the area of the debtor’s 
residence, for settlement of debts. Notice is then issued to 
every creditor to submit statement of debts owed by the debtor 
in question. The parties then explain their case. In the Punjab 
and Assam lawyers are allowed ; in C. P. they are not. The 
Board can only apply persuasion except in Bengal where the 
Boards can apply compulsion, if necessary. After a settlement is 
reached which usually relates to a certain percentage of the debt 
(40 per cent is most common) it is signed by the Board and is 
registered under the Indian Registration Act. Instalments arc 
then fixed with due regard to the paying capacity of the debtor. 
These usually range over a period of 15 to 20 year’s. 

Repayment of the conciliated debt is the crux of the whole 
problem, because on it depends the succps of this method or 
settlement. It is necessary, therefore, to devise suitable modes or 
payment. The 'Goverximent is iK)t in a position to shoulder the 



162 ECONOMICS OF INDIA AND PAKISTAN 

responsibility. Land Mortgage Banks run on co-operative lines 
seem to be the best agency for this purpose. In some cases, 
specially in the Punjab, payments have been made in one lump 
sum by sale of cattle, jewellery, etc. Payment through Land 
Mortgage Banks, however, gives the best hope of success. Such 
banks have already been established and are doing good work in 
the C. P, and Madras. By the method of conciliation, debts 
have been considerably reduced in Central Provinces (where 
under the new Act of 1939 Conciliation Boards have been 
abolished), Punjab, Bengal and Assam, In C.P„ for instance, a 
debt of Rs. 958,69 lakhs was reduced by 50 per cent to Rs, 479.22 
lakhs, 

8« Regulation and Control of New Borrowing and Lending ; 
The second approach to the problem of indebtedness is to create 
conditions under which unproductive borrowing and lending 
may be discouraged. This requires a proper education of the 
borrower and imparting to him a greater sense of responsibility 
and foresight. This can be done by intensive propaganda and 
gradual spread of primary education. An active village panchayat 
can do a great deal in this connection. 

But mere persuasion of this kind may take long to produce 
results. The peasant must be saved from his own self. This can 
partly be accomplished by taking measures to reduce his power of 
borrowing by limiting his credit. We have seen that debt grew 
after land became valuable, which made it safe for the lender to 
lend* Credit can be reduced, therefore, by putting limitations on 
the transfer of rights in land. On the other hand, the tempta- 
tions of the money-lender can be reduced by restricting his 
power to attach certain types of peasant’s property or powers of 
getting him arrested for non-payment of debt. In addition his 
system of lending can be regulated so that he is unable to 
increase illegitimately his profits from money-lending. This can 
be done by forcing him to keep proper accounts and to keep the 
debtor informed of the latter’s liabilities, by fixing a maximum 
rate of interest that can be charged, by making money-lending 
illegal except under a licence. Such measures have been intro- 
duced in various provinces and if they are properly enforced 
borrowing for unproductive purposes will be definitely discourag- 
ed,' We now proceed to consider these measures in greater 
detail. 

Restrictions on the Borrower : The most important of 
these are the restrictions on the transfer of land. The most out- 
standing example of legislation passed for this purpose is the 



RURAL FINANCE AND INDEBTEDNESS 163 

Punjab Land Alienation Act of 1901, amended in 1907 and again 
in 1938. A similar Act was passed for Bundelkhand (U. P.) in 
1903. Restrictions on the alienation of land by aboriginal tribes 
exist in the Central Provinces and Bombay. 

The Punjab Act led to a great controversy which is still not 
entirely dead and deserves our special attention. “ In accord- 
ance with its provisions,” in the words of the Agricultural 
Commission, “ the chief ancestral cultivating classes have been 

notified as falling within the restrictions imposed .Members of 

the notified tribes are grouped by districts and within such groups 
alienations are left free, subject to the ordinary customary law of 
the tribe ; sales and mortgages by members of a group to anyone 
not such a member are restricted by the Act.”^ The Commission 
found that the Act had achieved its main object, namely, that of 
restricting the transfer of agricultural land from the agricultural 
to non-agricultural classes* This was the evil in the Punjab that 
had called forth the Act 

The opponents of the Act predicted all sorts of evils as 
its consequence. The value of land would be depreciated, the 
provisions of the Act would be disregarded or evaded, the 
money-lender’s trade would become impossible and the borrower 
Would be pinched. In point of fact all these gloomy prognostica- 
tions proved groundless.”^ Some evasion, however, took place 
through the method of benami transactions, by which transfers 
were nominally made in favour of an agriculturist while the real 
benefit was received by the non-agriculturist money-lender. Such 
transactions were made illegal by an amendment in 1938. An- 
other amendment, the same year, put the agriculturist money- 
lender on exactly the same footing as the non-agriculturist 
money-lender. Land now cannot be transferred to either in 
payment of debt. 

The most common criticisms of the Act are ; — (/) It is a 
communal measure passed to benefit the Muslims against the 
Hindus. By giving statistics, Calvert has shown that ‘‘ a large pro- 
portion of agriculturists protected are Hindus, and these Hindus 
outnumber ail the non-agricultural Hindus in the province except 
the menials.”^ Again ‘‘if menials and untouchables are excluded 
there are more Hindus protected than unprotected.”* Moreover, 
“ the Act has counterparts in other countries .the American 


1. Report, p- 420. 

2» Calvert, op. cit., p. 268. 

3. Ibid, p. 270. 

4. Ibid, p. 269. 



164 


ECONOMICS OF INDIA AND PAKISTAN 


Homestead Law,’*^r The fact that in this province those desiring 
to purchase are mostly Hindus, while the proprietors of the land 
may be Hindus, Muslims, or Sikhs, is a pure accident of History, 

(ii) That it has failed in its real object, because it has left the 
poor agriculturist at the mercy of the agricultural money-lender, 
who is rapidly buying up his land and is reducing him to the 
status of a tenant. To this the first reply is that the Act was 
never intended to stop all transfer of land. Some transfers may 
be beneficial, e.g., an owner of an uneconomic holding may want 
to migrate to the town. Moreover, inquiries into sales by mem- 
bers of agricultural tribes do not show that large owners are 
buying up small owners in any appreciable extent. Finally, the 
amendment of 1938 puts the agriculturist money-lender on the 
same footing as the nomagriculturist. 

(Hi) That it prevents urban capitalist classes from investing 
money in agriculture and thus stands in the way of agricultural 
progress. “ In Germany,” says Darling, “ rural movements owe 
much to men who were not agriculturists.”^ To this it may be 
replied that conditions differ in different countries. The Punjab 
experience is that the non-agriculturist landlord (with very few 
notable exceptions in south-west Punjab) is incapable of cultivat- 
ing land himself and “ does not invest any capital in improving 
it... but contents himself with obtaining the best rent he can.” 

“ There is a total area of over five million acres owned by those 
who are not members of notified agricultural tribes, of which 
over three million acres are cultivated, but the owners have not 
taken the numerous opportunities open to them to evince any 
marked interest in agriculture, beyond planting a few gardens,”^ 
Besides auction sales in the Punjab colonies (of nuzul lands) are 
free from all restrictions ; the commercial classes have shown 
little desire to purchase such lands. Finally, the non-agricultural 
owners seldom cultivate their own land, but let it to the agricul- 
tural tribes on rent, this should be proof enough of their own 
belief as to who is best fitted to cultivate it.”® 

In addition to the restrictions on the transfer of land some 
other Acts place restrictions on the attachment of other forms of 
property up to a certain minimum. For instance, the Code of 
Civil Procedure was altered, in order to exempt from attachment 
or sale agricultural tools and implements and cattle necessary for 


1. Ibid, p. 270. 

2. Darling, op, cit., p. 188. 

3. Calvett, op. cit„ p. 271. 

4. Ibid, p. 274. 

5. Ibid. 



RURAL FINANCE AND INDEBTEDNESS 


165 


tillage and the material of the agriculturist’s house. The agricul- 
turist debtor was exempted from arrest for a decree of the 
Court. He was also given concession of repayment of his debt 
by instalments. The Deccan Agriculturists Relief Act, 1879, also 
contained similar provisions in addition to others. 

10. Restrictions on the Lender : The restrictions on the 
borrower are in a sense also restrictions on the lender, because 
they make the latter more cautious to lend when means of repay- 
ment are under restriction. But there are certain direct restric- 
tions on the money-lender which fall under the following 
categories ; — 

(0 Provisions for the registration and licensing of money- 
lenders, 

(//) Regulation of accounts, 

(Hi) Limitation of rates of interest, 

(iv) Miscellaneous provisions. 

The above provisions are contained in a number of Acts 
most of which have been passed by the various provinces under 
the stress of the recent economic depression. An important Act 
among these is the Usurious Loans Act, 1918, which was passed 
by the Central Government. It aimed at determining the legal 
and maximum amount of interest recoverable, reducing the rate 
of interest chargeable and fixing a maximum rate of interest. One 
important feature of the Act was that the court could reopen 
old transactions and inquire into the equity of the terms. The 
Agricultural Commission and the Banking Enquiry Committees, 
however, found that the Act was a dead letter. In recent years 
it has been amended by several provinces (like Bengal, Assam, 
C.P., Punjab, U.P., N.W.F.P., Madras and Bihar) with the- 
object of making it incumbent upon the courts of law to re- 
open the account and reduce the rate of interest as prescribed 
in the amending Acts, 


1* A list of these Acts according to provinces is given below 
THE PUNJAB; The Regulation of Accounts Act, 1930; Relief of 
Indebtedness Act, 1934; Debtors’ Protection Act, 1936; Registration 
of Money-lenders Act, 1938. 

BENGAL; Money-lenders Act, 1933. 

C.P. : Money-lenders Act, 1934; Reduction of Interest Act 1936; 
Protection of Debtors Act 1937. 

U- P. : Agriculturists* Relief Act, 1934; Encumbered Estates Act, 1934; 

Regulation of Sales Act, 1934 
ASSAM ; Money-lenders Act, 1934. 

MADRAS: Debtors* Protection Act, 1934; Agriculturists’ Relief Act, 
1938. 

BIHAR ; Money-lenders Act, 1938. 

ORISSA; Money-lenders Act, 1939. 



166 ECONOMICS OF INDIA AND PAKISTAN 

Other Acts were originated by the Provincial Governments^ 
in each case. Since it is not possible to discuss them separatelyj 
their provisions will be examined under the various heads as 
listed above. 

(0 Registration and Licensing of Money-lenders. — The money- 
lender has to get himself registered and to obtain a licence in the 
C.P., Bihar and the Punjab. In the case of dishonesty such 
licences can be cancelled. Penalty is provided for money-lenders 
not taking out a licence. In C.P. it is a fine ; in Bihar, the 
Punjab, Bengal and U.P. the assistance of courts is denied to- 
them in enforcing their claims. To enforce the system of 
registration and licensing is difficult. Supervision by inspectors 
as in U.S.A. can ensure better observation of the law. 

(ii) Regulation of Accounts. — The money-lender has to maintain 
regular account books and he has to furnish each of his debtors 
with a periodic statement giving details of the latter’s liabilities, 
with respect to principal and interest due with respect to each 
loan transaction. In Assam and Madras, the statement is to be 
supplied only on demand by the debtor. He must also furnish 
receipts of payments received by him. Penalties (usually loss of 
interest) are provided for failure to keep accounts. Entry of, 
fictitious amounts as debt is declared illegal and punishable with 
fine in Assam, Bihar, Orissa, Bombay and U.P. The Punjab Act 
provides for dismissal of the suit. 

As to the working of this provision it has been found that 
it is usually disregarded in practice by the money-lender (Punjab) 
and is rarely enforced by the debtor (C.P.) The debtor’s necessity 
and his ignorance of his rights stands in the way of the effective- 
ness of the law. 

(Hi) Limitation of Interest Rates} — Maximum rates of interest' 

1. The maximum interest rates aa fixed in the various provinces are as follows j 
Secured Unsecured 


onces 

Simple 

Interest 

Compound 

Interest 

Simple 

Interest 

Compound Interest 
per cent 

Madras 

per cent 
9 

per cent 

Considered excessive 

per cent 

15 

Considered excessive 

Bombay (Bill) 9 

Prohibited 

12 

Prohibited 

Bengal 

15 

10 

25 

10 

Punjab 

12 

9 (with yearly 

18 3/4 

14 (with yearly 

Bihar 

9 

rests) 

Prohibited 

12 

rests) 

Prohibited 

Orissa (Bill) 

9 

Prohibited 

12 

Prohibited 

C.F. 

12 

5 (with yearly 

18 

5 (with yearly 

Assam 

12 1/2 

rests) 

Prohibited 

18 3/4 

rests) 

Prohibited 

U. P. 

12 

Prohibited 

24 

Prohibited 



RURAL FINANCE AND INDEBTEDNESS 


167 


that can be charged are fixed by legislation and distinction is 
made between secured and unsecured loans except in Madras. 
Unsecured loans pay higher rates. In some provinces (Bihar and 
Assam) compound interest is prohibited. In U.P. Government 
notifies rates from time to time in the light of the conditions of 
the money market. In the Punjab on secured loans the maximum 
rate is 12 per cent simple and 9 per cent compound interest and 
on unsecured loans it is 18f and 14 per cent respectively. The 
highest interest is allowed in Bengal. It is 15 per cent simple and 
10 per cent compound on secured and 25 per cent simple and 
10 per cent compound on unsecured loans. 

In most provinces (Assam, Bengal, Bihar, the C.P., Madras, 
U.P., and the Punjab) the principle of damdupat is adopted 
according to which the interest of a loan cannot exceed its 
principal. 

In is very difficult to enforce interest rates. When the 
borrower is needy the lender can always charge a higher rate, 
either by an agreement out of court or by entering a higher sum 
as principal than is actually loaned. Such abuses have already 
come to light in Bengal, the U.P. and Madras. By a vigorous 
propaganda the cultivator should be informed of the existence 
of protective measures.^ 

(iv) Miscellaneous.— Other provisions relate to protection of 
the debtor from intimidation and molestation (as in C.P., Bengal, 
and U.P.). Others exempt his holding from attachment and sale 
in payment of the debt — as in the Punjab, Bihar and U.P. 

11. Debt Legislation in the Punjab ; In the above treatment 
we have dealt with the various provincial measures together. It 
is not possible to give provisions of individual measures passed in 
all the provinces, but we may summarise the provisions of the 
Acts passed in the Punjab. This is done below : 

(0 Regulation of Accounts Act, i939* Under this Act the 
creditor is recjuired to keep regular accounts relating to each of 
his debtors separately. At the end of every six ninths he must 
furnish a legible statement of accounts to each and every debtor. 
If he fails to do so, with respect to a loan the court is required 
to disallow, as may seem reasonable, either whole or part of the 
interest due on it, even though his claim has been otherwise 
established in whole or in part and further disallow costs. 

(//) The Relief of Indebtedness Act, 1934 “The main provisions 
of this Act are : (a) A person owing Rs. 250 and over can apply 

1. Abbyankar; Provincial Debt Legislation, pp. 45-47. 



168 ECONOMICS OF INDIA AND PAKISTAN 

to be adjudicated insolvent, (b) Estates up to the value of 
Rs. 2,000 can be summarily administered, /.e., without appointing 
a receiver or publishing certain notices, (c) Interest is to be 
deemed excessive by the court if on secured loans it exceeds 12 
per cent per annum simple or 9 per cent compound, and if on 
unsecured loans it exceeds 18 | per cent simple or 14 per cent 
compound, (d!) The Act makes provision for setting up of Debt 
Conciliation Boards. Such a Board is to consist of a Chairman 
or two or more members appointed by the local Government for 
a term not exceeding three years. 

A debtor or any of his creditors may apply for settlement to 
the Board. The Board calls, where the debtor has appeared, upon 
every one of his creditors to submit a statement of the debts 
owed to him by the said debtor. The debt for which the state- 
ment is not submitted is deemed for all purposes and all occasions 
to have been duly discharged. 

The creditor has to furnish all the necessary information to 
the Board well supported by documents regarding his claims. 
The debtor has to explain his case. The Board then endeavours 
to induce them to arrive at a settlement. If a settlement is 
arrived at, the Board reduces it to writing. The agreement is then 
registered and take effect as if it were decree of a Civil Court. 
If no settlement is arrived at, the Board dismisses the application. 
If the Board thinks that the offer by the debtor and refusal by 
the creditor is fair, the Board may grant the debtor certificate in 
respect of the debt owed by him to such creditor. If the creditor 
sues the debotor for such -a debt, then the court does not allow 
costs in such a suit, nor interest on the debt after the date of 
registration, at more than 6 per cent per annum simple interest, 
(e) The principle of Damdupat is accepted, according to which no 
court can pass a decree in any suit brought against an agriculturist 
for a sum larger than twice the amount of the sum taken as princi- 
pal. Banks, however, are excepted, (f) Finally, an agricultural 
debtor may at any time deposit in court sum of money in full or 
part payment of his debt for payment to his creditor, and from 
that date interest ceases to run on that deposit. 

(ill) Debtors’ Protection Aa, 1936— This Act provides that a 
Civil Court can order the attachment and temporary alienation of 
the land of a judgment-debtor. For execution the proceedings 
are transferred to the Collector of the district who is to determine 
how much of the land is to be attached and alienated and for 
what period, not exceeding 20 years. 



RURAL FINANCE AND INDEBTEDNESS 


169 


(iv) The Land Alienation (Second Amendment) Act, 1938. — ^This 
Act declares Benami transactions to be invalid. This fills a loop 
hole in the Land Alienation Act of 1901 which prohibited sales 
of land by an agriculturist to a non-agriculturist, as we have 
already seen. Some non-agriculturists used to purchase land in 
the name of a member pf the agriculturist tribe and get the 
benefit themselves. This is not strictly a debt legislation though 
probably occasions for such transactions were created by advances 
of loans. 

(v) The Land Alienation (Third Amendment) Act, 1939. — ^This 
Act seeks to put the agriculturist money-lender on the same 
footing as the non-agriculturist money-lenders so far as the 
acquisition of land of the debtor by the creditor is concerned. 
The creditor cannot buy the land of the debtor until three years 
after the payment of the debt in full. 

, (vi) Registration of Moneydenders Act, 1939. This Act requires 
ail money-lenders to get themselves registered and to hold licence 
on payment of the fee that may be fixed. Failing this no court is 
to entertain any suit by a money-lender for the recovery of a loan, 
or application for the execution of any decree relating to a loan. 
The Collector may cancel a licence for a specified period for 
malpractice. 

(vii) Restitution of Mortgages Act, 1938.— This Act extinguishes 
mortgages effected before the commencement of the Punjab Alie- 
nation of Land Act, 1901. Compensation may be paid but only 
under certain conditions. 

12. Critical Estimate of Debt Legislation : The debt legis- 
lative measures considered above have been variously view^. 
On the one hand they have been welcomed as blessings for the 
mass of the peasants and on the other they have been as 

a curse. The Punjab measures were called the Golden mils 
and the ‘'Black Bills” respectively by their supporters and op^ 
ponents. Apart from the view of interested parties the toliow" 
ing points of criticism deserve attention. 

(0 The greatest objection that has been advanced gainst the 
debt legislation is that it has led to the contraction of credit in 
the rural areas. The Statutory Report of the Reserve Bank draws 
attention to this fact. “ In areas where such legislation is in torce, 
it is said, that the money-lenders have discontinued lending 
except to old and trusted clients and have restricted their 
to a minumum.’’^ (/) The contraction of credit cannot all be 

1. Statutory Report on Agricultural Credit (1937, -p. 10. 



170 ECONOMICS OF INDIA AND PAKISTAN 

attributed solely to debt legislation. The economic depression of 
the thirties was also responsible for it to a large degree. Many* 
money-lenders who were also agriculturists had their assets reduc- 
ed due to fall in prices. Moreover payment of old debts stopped 
due to the incapacity of the peasantry and hence new loans could 
not be advanced. Even the Co-operative Societies were faced 
with the same difficulties and their advances fell considerably due 
to the same reason. 

Even if these measures were responsible for contraction of 
credit, it was not an unmixed evil. We have seen that the major 
portion of the rural debt in India is incurred for unproductive 
purposes. If the money-lender has become more cautious, and 
that is one of the objects of his legislation — unproductive bor- 
rowing will be discouraged, and the cultivator will learn to live 
within his means. As regards productive borrowing, no money- 
lender need be afraid of losing his money in such cases. Thus 
honest money-lenders have nothing to fear from this legislation. 

00 Further it is objected that the measures have encouraged 
default of repayment of debt among the people. Even debts 
owed to Government and Co-operative Societies are not paid. 
The debtors expect them to be reduced. This sort of demoraliza- 
tion, is however, not very common. This can be avoided if 
debtors are made to pay all the legitimate dues within their 
capacity to pay. The real trouble is that adequate arrangements 
do not exist which should assist the debtor in the payment of 
the reduced debts. The establishment of Land Mortgage banks 
can supply this need. They can arrange for cash payment on, 
behalf of the debtor and realise the amount in small instalments 
over a period of say 20 to 25 years. Another way is for the 
Government to come forward with assistance as was done by the 
Government of the State of Bhavnagar. There the State took 
over the entire debt after it had been reduced (from Rs. 86.4 
lakhs to Rs. 20.5 between 1930-34) and arranged for its recovery 
with 4 per cent interest along with the land revenue over a 
period of 25 years. 

(in) It is also said that in some cases the resources of the 
debtor are so meagre that he is unable to pay even the reduced 
debt. For this a simple Rural Insolvency Act is necessary. 
There was an Insolvency Act passed in 1920, but it was intended 
only for debtors owing more than Rs. 500. Since the courts do 
not allow the benefit of the Act to debtors whose rights are 
protected from sale in execution, the Act is not helpful to the 
cultivators. The Royal Commission on Agriculture recommen- 
ded amendment enabling debtors of less than Rs. 500 to have its 



■RURAL FINANCE AND INDEBTEDNESS 


171 


benefit. This recommendation has been giv^n effect to in C. P* 
and Berar and the Punjab. The Bengal Agriculturist Debtors 
Act, 1936, also contains Insolvency provisions. In other 
provinces no such provisions exist. Similar Insolvency provisions 
should be made in all the provinces. 

(rV) Further it is pointed out (e,g. C. P. Land Revenue Report, 
1937) that after the debt has been reduced and instalment fixed, 
the debtors find it difficult to secure new credit, until the last 
instalment has been paid. To avoid this difficulty the Concilia- 
tion Board should allow adequately for the current needs of the 
debtor while fixing his capacity to pay. 

(v) Another criticism is that the limit’of the debt which can 
be conciliated is fixed too high in some provinces, e.g., Rs. 50,000 
in C. P. and Rs. 15,000 in Bombay. This is a minor matter and 
can be set right, if necessary, by an amendment. 

(vi) A criticism relates to the effects of debt legislation on 
the Co-operative movement. Co-operative Societies, no doubt, 
have been given a privileged position by these Acts. In the 
Punjab, Co-operative debts cannot be touched by the Concilia- 
tion Boards. In Central Provinces and Berar, Madras, Assam 
and Bengal no settlement is valid without the previous written 
permission of the Registrar. In Madras, the Agriculturist Relief 
Act 1938 does not apply to Co-operative debt. The reasons foi 
the treatment are obvious. Co-operative Societies keep regular 
accounts, they are under Government supervision and they are 
not profit-making bodies. Moreover these advances come out of 
the common fund of members and concession to Some may be 
detrimental to others. But it should be remembered that a part 
of the advanced of Co-operative Societies are bad debts and their 
writing off will be good for the movement. It will give a more 
realistic picture of their assets. Hence all debts, Co-operative 
and others, should -be taken into account before a debtor’s 
capacity to pay is fixed. So far so good. . But the working of 
societies has been adversely affected by the debt conciliation as 
pointed out by the Reserve Bank Review, ‘.‘because in many 
provinces, a member owing a debt to his society can file an 
application before the Conciliation Board and suspend payment 
of his instalment until the award is made by the 3oard and 
approved by the Regikrar, thereby directly freezing the funds of 
the societY irrespective of the ultimate outcome of the applica- 
tion. ” Large amounts of ' Co-operative funds have thus been 
locked up, and the different processes of unfreezing them are 
hindered by wilful default and the disinclination towards debt 
repayment which has proved infectious and which is not 



172 


ECONOMICS OF INDIA AND PAKISTAN 


enlightened by a due sense of discrimination between co- 
operative and other debts.” ^ 

It maJy be emphasized, however, that debt legislation is not a 
final remedy for the evil of indebtedness. Money-lenders’ 
activities may be regulated, maximum rates of interest may be 
fixed, old debts may be reduced or abolished, but unless the basic 
causes that lead to the emergence of this evil are tackled, no 
permanent cure will be possible. Indebtedness will arise again. 
The permanent cure involves the rehabilitation and reorganiza- 
tion of our whole agricultural economy. In fact it involves 
tackling of issues which go beyond agriculture, issues which 
can be tackled only, under a planned system of economic 
development of the country. 

The need for agricultural finance, however, cannot be 
minimised. Let us see what alternative methods, other than 
private money-lending, are available to supply this need. 

13. Alternative Agencies of Finance: In addition to 
reforming the money-lender’s system, in order to provide for the 
legitimate needs of the peasant, alternative sources of credit must 
be made available to him. To some extent they are already being 
utilized, but greater development in these directions must be 
encouraged by all possible means. 

At the present, time the agriculturist is financed directly or 
indirectly from the following sources: 

(/) Village money-lenders, professional or non-professional. 

{a) Indigenous bankers (usyally through intermediaries). 

{Hi) Commercial banks — Imperial Bank, Joint Stock Banks. 
These also provide finance indirectly through inter- 
mediaries of various kinds. 

{iv) The Government — takkavi loans, etc. 

(v) Co-operative organizations — Land Mortgage Banks and 
other Co-operative societies. 

Of these the following three sources deserve attention;— 

(1) The Government. 

(2) (Non-Co-operative) Land Mortgage Banks. 

(3) Co-operative organizations. 

The Co-operative movement has a scope which extends 
beyond the mere supply of credit and will demand our attention 
in the next chapter. The other two sources may be considered 
here. 



RURAL FINANCE AND INDEBTEDNESS 


173 


(1) The Government — At the recommendation of the Famine 
Commission of 1880, two Acts were passed in the eighties of the 
last century. (0 Land Improvement Loans Act, 1883, which 
provided for the supply of long-term credit for permanent 
improvements on land like construction of wells and embank^ 
ments. (//) Agriculturist Loans Act, 1884, under whicl\ short- 
term loans were given for current agricultural needs like purchase 
of seed, implements, manure and cattle. These loans have 
greatly helped the agriculturist especially during period of calami- 
ties like famines. But their scope is limited and they have 
certain inherent defects not easy to mend — like endless delays, 
rigid enforcement of repayment, petty exactions by the officials, 
etc. Amending Acts have been passed in Madras (1935) and 
U. P. (1934) which have widened the scope of the Land Improve- 
ment Loans Act (1883) by permitting loans for redemption of old 
debts. The credit facilities that the Government can give, 
moreover, are necessarily limited ; hence the need for some 
other agency. 

(2) Land Mortgage Banks , — ^These are designed to supply 
credit on the security of land for long periods especially, for 
redemption of old debts. They can be co-operative, non-co- 
operative or quasi-co-operative. For the present purpose the 
co-operative type is the most suitable and hence we shall discuss 
them in the next chapter in connection with the Co-operative 
movement. 



CHAPTER VIII 


CO-OPERATION^ 

1. Meaning : Every group of individuals,” says Strick- 

land, associated to secure a common end by joint effort may be 
said to co-operate ; for instance, a football team, a gang of 
robbers, or the shareholders of a speculative company. A 
century of history has given to Co-operation with a capital ‘ C ’ a 
more precise meaning. It indicates the association of individuals 
to secure a common economic end by. honest means; it is also 
essential in many forms of* co-operation that the individuals 
possess a personal knowledge of one- another.” 

“ The basis of association,” continues the same writer, “ is 
(0 voluntary, (//) democratic ; voluntary because those only enter 
it who feel the economic need at which it aims. . . ; democratic, 
because those who feel a real need will be men of modest status, 
who, if only the honest are admitted, will not resent equality, 
will in fact meet most easily on an equal footing 

Thus three characteristics of a co-operative society' ar^ 
notable : (a) it is voluntary, (b) it is democratic (c) the moral 
element in its aims is as important as the material. 


1. Some oft-quoted definitions of co-operation are given below : — 

(i) “ The theory of co-operation is very briefly that an isolated and power- 
less .individual can by association with others and by moral develop- 
ment and mutual support, obtain in his own degree, the material 
advantage's available to wealthy or powerful persons, and thereby 
develop himself to the fullest extent of his natural abilities. By the 
union of forces material advancement is secured, and by united 
action self-reliance is fostered, and it is from the inter-action of these 
influences that it is hoped to attain the effective realization of the 
higher and more prosperous standard of life which has been character- 
ized as better business, better farming and better living.” 

Maclagan Committee Report, para 2. 

(ii) Co-operation is the act of persons, voluntarily united, of utilising 
reciprocally their own forces, resources or both under their mutual 
management to their common profit or loss.” Harricks : Ruial 
Credits : quoted by Calvert i the Law and Principles of Co-operation, 

p. 12. 

(Hi) Co-operation is self-help made effective by organization.” Plunket 
Co-operation, p. 7- 

2. Strickland : Co-operation in India, pp. 15-16. 



CO-OEERATION 


175 


, In other words .the membership involves no compulsion, 
every member is good as any other, and it aims at moral uplift 
of the members in addition to their material advancement, 

2 , Origin and Development . in India i India was faced 
with the problem of the growing rural debt in the closing 
decades of the 19th century. About this time the success of 
small village banks in Germany and Italy attracted the attention 
of those who were anxious to solve this problem. The Madras 
Government deputed Frederick Nicholson to study the system 
and his report was published in 1895-97. About this time Mr, 
Dupernex in the United Provinces, and Edward Maclagan and 
Captain Crothwaite in the Punjab were organizing credit societies 
which could be registered under the ordinary company law. 
The Famine Commission of 1901 strongly recommended the 
introduction of credit associations. The result was the passing of 
the Co-operative Credit Societies Act in 1904, 

The object of the Act was to encourage thrift, self-help and 
co-operation among agriculturists, artisans and persons of limited 
means. The societies were to be either rural or urban. Generally 
speaking, in the organization of rural societies the principles of 
Raiffeisen^ and ’ in that of urban societies those of Schulze- 
Delitzsch^ (both pioneers of co-operation in Germany) were 
followed. According to the Agricultural Commission, “ three 
points about the new policy deserve notice : Firstly, it was 
deliberately decided to restrict the operation of the Act to credit 
only. This is partly because of the importance of the problem of 
debt and partly the specially educative value of a credit society 
which could pave the way for other forms of co-operation, 

h The Principles of the Raiffeisen model are 

(a) Ten or mote persons can form a society, (b) No shares are issued ; 
capital is secured by borrowing money on the joint respohsibility of all 
the members, (c) The members have unlimited liability, (d) Each 
society is limited to the village, so members are expected to know one 
another's financial conditions and no person can become a member of 
more than one society, (e) There is no entrance fee. (/) The only 
paid member is the secretary-treasurer, (g) Loans are granted for 
productive purposes only and on personal security- (k) No dividends 
are distributed : on the dissolution of a society the reserve funds are 
devoted to public or charitable purposes- 

2. The principles of the Schulze-Delitzsch model are 

(a) It believes in a large membership drawn from a wide area : (b) in the 
payment of large salaries to office-bearers : (c) in the distribution of 
handsome dividends, (d) in conducting general banking business ; (e) 
in charging entrance fees, and keeping out persons who possess 
no incomes, (f) its aim is more materialistic than humanitarian ; Cg) 
the liability of members is limited. 



176 


ECONOMICS OF INDIA AND PAKISTAN 


Secondly, the movement was not the outcome of any popular 
demand. It was the Government which was anxious to amelio- 
rate the condition of the people. Public enthusiasm had yet to 
be created. Thirdly, it was inevitable under such conditions 
that a Government department should be established to take 
charge of the movement until unofficial workers were forth- 
coming. These features have all along influenced the course of 
development of co-operation in India.’”- 

Credit societies were formed under the Act of 1904, and by 
the year 191 1-12 they numbered 8,177 with a membership of 
403,318 and the working capital amounting to Rs. 3,35 lakhs. 

Soon, however, certain defects were realized in the Act of 
1904 : (6 It only sanctioned credit societies ; (//) it provided for 
no central agencies for supervision and supply of capital ; and (iii) 
classification into urban and rural societies was found to be 
unscientific and inconvenient. A new Act Co-operative Socie- 
ties Act — was therefore passed in 1912. 

The new Act met the defects of the old. 

(0 Non-credit forms of co-operation affecting purchase, sale, 
production, insurance, housing, etc., were recognized. 

(I'O New organizations for supervision, audit and supply of 
capital, were recognized: (a) unions, consisting of primary 
societies for control and audit ; (j?) central banks ; and (c) provin- 
cial banks for supply of capital. 

(Hi) Instead of the old distinction between rural and urban 
societies, a more scientific distinction was made betweeri those 
with limited and those with unlimited liability. The liability of 
society of which the members were registered societies was to be 
limited. Societies which aimed at provision of credit and the 
majority of members of which were cultivators, were to have 
unlimited liability. The others were left to the option of the 
members. 

The Act of 1912 considerably stimulated the growth of the 
movement. The expansipn was especially, rapid after the Great 
War of 1914-18. But after 1930 due to the Depression the 
weaknesses of the movement were brought to the surface. Then 
followed a period of consolidation and rectification, until the 
last war had its own impact on the movement. The erratic 
course of agricultural prices was not calculated to strengthen the 
position of the agriculturist. The war made the adequate supply 


1. Agri'Comna-, Report, pp. 444'45. 



CO-OPERATION 


177 


of cheap loanable resources difficult. Co-operative banks along 
with others had also to face withdrawals of deposits during the 
critical period of May, June, 1940, though confidence was restor- 
ed soon. The war, howeverj has stimulated consumers’ stores 
and marketing societies and has given an impetus to small 
industries like woollen and handloom weaving in* the develop- 
ment of which the Co-operative department have taken great 
interest. 

In the meantime, the movement has been investigated by 
various central and provincial committees, who from time to time 
have scrutinized its working. The earliest of these and the most 
important was the Maclagan* Committee which reported in 1915 
and made far-reaching proposals for its future development. The 
Maclagan Committee referred to the whole of India. Under the 
Reforms of 1919, Co-operation became a provincial transferred 
subject. Since then various Provincial enquiries have taken place 
which have revealed many defects in the movement, as we shall 
see. The principal of these enquiries were those undertaken by 
the King Committee (1922), which caused a decentralization of 
control and finance in the Central Provinces, the Oakden Com- 
mittee (1926) which brought about a transfer of the supervising 
staff in the United Provinces from the Central Banks to the 
Provincial Unions, the Townshend Committee (1928) which 
sought to remedy the evils of lending on the basis of material 
assets rather than on character in Madras societies, and the 
Calvert Committee (1929) which pointed out that the help of 
drained officers had been unwisely replaced by guaranteeing 

unions without expert knowledge in Burma The Central 

and Provincial Banking Enquiry Committees (1929-31) made 
numerous recommendations with regard to co-operation ..... 
The fact most prominently brought to light in their report was 
the heavy indebtedness of the rural population and the urgent 
need for relief from ancestral and accumulated debt, if short- 
term societies for credit were to prosper.”^ In 1934 an experienced 
co-operative officer was deputed to consider means by which the 
Reserve Bank could assist the recovery and progress of the 
movement. He recommended a more thorough training of the 
co-operative staff and a sustained teaching of the co-operative 
principles to the members. Courses have been arranged in several 
provinces to achieve these ends. More recent enquiries have 
taken place in Bombay by Messrs. Mehta and Bhansali (1937) and 
in Madras by the Vijayar-aghavacharya Committee (1939-40). ^ 


h Strickland, op. cic., p 60 . 



178 ECONOMICS OF INDIA AND" PAKISTAN 

Partly as a result of these enquiries, various provinces have 
passed their own Co-operative Societies 'Acts to meet their local 
problems. The lead was given by Bombay in 1925 and was 
followed by Madras (1932)3 Bihar and Orissa (1935), Coorg (1937) 
and Bengal (1941)* 

In spite of the vicissitudes through which the movement has 
passed during the last year,^ statistics indicate a steady progress 

(ALL-INDIA FIGURES) 

Number 




Number 

of 

Working 



of 

Members 

Capital. 

Years. 


Societies 

(Primary 

Rs. 



(LOGO) 

Societies) 

(Crores) 




(Lakhs) 


Average for 5 years ending 1914-15 ... 

12 

5*5 

5*48 

9} ff M 99 97 

1919-20 

28 

11*3 

15*18 

99 99 99 99 79 

1924-25 

58 

21*5 

36*36 

99 99 97 97 77 

1929-30 

94 

36*9 

74*89 

99 99 99 '79 77 

1934-35 

1,06 

43*2 

94*61 

99 99 79 9% 79' 

1939-40 

1,17 

SO-'? 

104*67 

Fox the year 

1942-43 

M6 

69*1 

121T4 


As regards the position of individual provinces, the table^ 
given below indicates the extent of development that has taken 
place : — 


YEAR 1940-41 


frovinee 

Number of 
Societies 

Number of 
Members of 
Primary So- 

Number of 
Annas of 
Working 

Population 

per 100,000 

cieties per 

Capital per 

(Millions) 

Madras* •-v 

inhabitants. 

29.2 

1,000 

inhabitants* 

24.0 

head of 
Population. 

81 

49.3 

Bombay 

25.3 

30.9 

130 

20.9 

^nd 

295 

15.1 

107 ’ 

4.5 

Bengal 

67.0 

21*4 

56 

60*3 

Bihat 

22.8 

6.3 

20 

36.3 

Orissa 

31.2 

12.3 

23 

8.7 

UP*- 

30.6 

14.8 • 

10 

55.0 

Punjab 

91.8 

36.4 

88 

.28.4 

C.P. and Betar.*. 

29.4 

M 

48 

16.8 

Assam 

15.0 

5.6 

12 

10.2 

N.W.F.P. 

31.5 

11*6 

13 

3*0 

Coorg 

156.0 

109.7 

167 

0.2 

Ajmer-. 

Meiwara? .*• 

126.5 

37.0 

170' 

0.6 


1. Statistical Statement Relating to Ccpopefative Movement in India* 
Fubkshed by Reserve Bank of India, (1940-41). 

2. ** Statistical Statement,” op. dt. 



CO-OPEBATION 


179 


Hyderabad 

Administered 


Area 

20.0 

146.9 

531 

0.1 

Delhi 

44.0 

22.2 

70 

0.9 

Total British 

India ••• 

42.1 

' 19.0 

53 

2952 

Total Indian 

States^ 

413 

17.5 

39 

44.2 

Grand Total ... 

41.9 

18.8 

52 

339.4 


3, Agricultural Co-operative Credit : The following diagram 
explains the structure of the co-operative system in India : — 

Co-operative Societies 


Primaiy 

1 


Secondary 


f 

Credit 

Agricultural 

or 

Non-agricultutal 

Non-Credit 

1 

Agricultural 

or 

Non-agricultural 

Unions 

Central 

Banks 

Provincial 

Banks 


Primary Societies may be thus classified : — 

(1) Agricultural Co-operative Credit Societies. 

(2) Agricultural Co-operative Non-credit Societies. 

(3) Non-Agricultural Co-operative Credit Societies. 

(4) Non-Agricultural Co-operative Non-credit Societies. 

The following table gives an idea of the relative importam 
of each type : — 

PRIMARY SOCIETIES IN INDIAN 

Credit Non-^credit Total 

Year Agri. Non-agri. Agri. Non-agri. AgrL Non-a| 

1939- 40 101,401 -f 6,951 17,343 + 9,795 118,744+^16,* 

Total ... 108,252 27.139 135,491 

1940- 41 ... 104,084 + 7,071 19,639 +10,371 123,723+ 17,- 

Total ... 111,155 30,010 141,165 

Note the preponderance of agricultural co-operative ere* 
societies. 

Mysore, Baroda, Hyderabad, Bhopal, Gwal 
Indore, Kashmir, Travancore and Cochin. 

2. More recent figures not published in detail. 



180 


ECONOMICS OF INDIA AND PAKISTAN 


4. Agricultural Co-operative Credit Societies; A primary 
agricultural credit society can be formed by ten or more persons 
(maximum 100) by applying for registration to the Registrar of 
Co-operative Societies. Each province has one such Registrar 
•who is the head of the Provincial Department of Co-operation. 
The area of operation is usually a village to . ensure mutual 
knowledge and supervision on the part of members. The 
liability of members is unlimited to inspire confidence in the 
minds of the outsiders and to stimulate mutual control and 
supervision among the members. The working capital is derived 
from entrance fees, deposits, share capital, if any, of the 
members. Share capital is issued only in the Punjab. U. P. and 
Madras. Capital is also secured from outside— -loans and 
deposits from government, from other societies and from 
Central and Provincial Banks. 

Loans are given to members for (0 production purposes like 
(a) short-term credit for current agricultural operations and (b) 
long-term credit for permanent improvement of land; (ii) for 
unproductive purposes in moderate amounts, e.g., for marriage 
ceremonies, etc.; and {Hi) for redemption of old debts. Loans are 
usually given on personal security and sometimes on security of 
property, etc. Repayment is allowed in easy instalments. In the 
case of disputes, arbitration is provided for to discourage litiga- 
tion. The Registrar can dissolve a society if it does not improve 
its working in spite of warnings. 

. Every society is required by law to build up a reserve fund 
to which all profits are credited in the case of societies with no 
share capital. In the case of others, 25 per cent of profits is 
carried to this fund. Ten per cent of the profits, if the Registrar 
allows, can be spent for charitable purposes. Accounts of the 
society are annually audited by officers deputed by the Registrar. 
The societies enjoy c'ertain privileges like exemption from stamp 
duty, registration fee and income-tax. Their shares cannot be 
attached and they have a prior claim over creditors. 

The management is in the hands of two bodies, /.e., the 
General Committee consisting of all the members and the smaller 
Managing Committee elected by the (3eneral Body. The current 
business is disposed of by the Managing Committee, e.g., granting 
loans, admitting new members, etc. The General Committee 
elects the Managing Committee, appoints the paid secretary, 
amends by-laws, etc. 

At the end of 1940-41, there were 123,723 Agricultural 
societies in India. Of these 104, or 8L3 per cent were credit 



CP-OPERATION 


181 


societies. 

follows: 


Their 'financial position on 30th June, 1941, stood as 



Rs. Lakhs. 

Shate Capital 

4.15 

Reserve and other funds 

8.50 

Deposits •* 

2.38 

Loans 

... 15.49 


Total working capital 


30.53 


These figures show that such societies work with about Rs. 14 
crores of their own capital (including members’ deposits under 
this head) and they borrow about 17 crores from outsiders. The 
owned capital is thus about 45.5 per cent of their total working 
capital. This proportion is rising steadily as years pass by 
The Reserve Fund of Rs. 8^ crores seems quite satisfactory. But 
the Reserve Fund may be illusory in the sense that they may not 
always represent surplus assets. ‘‘They have in many cases been 
created without making any provision for bad debts out of the 
profits of societies and are often invested in the business of the 
societies.”'^ The finance from external sources play a dispropor- 
tionately large part. This indicates that the element of thrift in 
the movement is small. “ Indeed the financial distributary system 
of co-operative credit in this country,” says the Reserve Bank 
Review, “is largely a channel for the flow of Funds from the well- 
to-do townspeople through the Provincial and Central Banks to 
the primary societies and thence^ to the numerous and scattered 
individual members of societies.”*’’ 

In addition to the initial weakness the depression of the 
thirties hit the credit societies hard. Their position was unsatis- 
factory even at the outbreak of the recent war. At the end of 
1939-4) one half of their outstanding loans of Rs. 23.14 crores 
were overdue. This percentage was 46 for 1940-41* That the 
Co-operative Credit was contracting was revealed by the fact that 
during ten years ending 1938-39 there was a drop of 50 per cent 
(from Rs. 12.55 to Rs. 6.75 crores) in the amount of fresh loans 
issued to individuals by agricultural societies. 

Another indication of the weakness of the movement was 
that in four provinces over 40 per cent and in three provinces 
about 25 per cent of the total number of societies fell under D 
and E Classes (bad and hopeless) and only 10 per cent ^ in six 
provinces came under A and B Classes (very good and good’). 


1. Indian Year-Book 1943-44, p* 377. 

2. Review of the Co-operative Movement, op. cit., p. 6. 

3. Ibid, p. 7. 



182 ECONOMICS OF INDIA AND PAKISTAN 

Moreover in 1939-40 ‘‘ nearly nine per cent of the total number 
of existing societies in India were in the process of liquidation, 
the percentage being more than ten in respect of seven out of the 
eleven provinces, and as much as twenty-eight in one instance*”^ 
In 1934 Sir Malcolm Darling found that during the thirty years 
life of the movement as much as 24 per cent of the total number 
of societies started had gone into liquidation. This percentage 
v^ied from 9 in Bengal, to 49 in C. P. and Berar and 73 in Burma, 
This involved a prodigious waste of time, effort and money. 

The immediate causes of the stagnation of the movement was 
the prevailing economic depression and to some extent the debt 
legislation. The latter adversely affected the societies because, as 
already noted elsewhere, in many provinces a member owing a 
debt to his society can file an application before the Conciliation 
Board and suspend payment of his instalments until the award is 
made by the Board and approved by the Registrar, thereby 
directly freezing the^ funds of the society irrespective of the 
ultimate outcome of the application.’’^ Large amounts of 
Co-operative funds were thus locked up, paralysing the working 
of the movement. The basic causes of the weakness, however, 
lay much deeper. The most fundamental was “ the indifferent 
observance of co-operative principles in the previous years of 
comparative prosperity.” We shall come to' the basic causes later. 

5. Agricultural Co-operative Non-credit Societies ; From 
the table on page 179 it is clear that non-credit societies have not 
developed to the same extent as credit societies. They were about 
one-fifth of the total number of societies in 1939-40 and a little 
more than one-fifth in 1940-41. Agricultural non-credit societies 
were about one-eighth of the total societies in 1939-40 and about 
one-seventh in 1940-41. Their slow development has been due 
to a, number, of causes: (/) The Act of 1904 made no provision 
for such societies and it was only after the Act of 1912, that such 
societies began to be formed. (//) In other countries— e.g., Europe 
and America — also the non-credit movement developed later and 
much slower than the credit movement, due to greater training 
and experience necessary for running them. Qh) The industrial 
backwardness of India and illiteracy of the mass of the people also 
stood in the way. (iv) Finally, credit societies in many cases also 
took up^ non-credit functions— such as purchase of implements, 
seeds and manures, etc. > 

In recent years, however, non-credit societies, especially 
agricultural non-credit societies, have been receiving considerable 


1 . Ibid, p 8. 

2. Ibid, p. 9. 



183 


CO-OPERATION 

■ r 

attention and have shown good progress. Now they have been 
introduced over a large field of agricultural operations/e.g., sale' of 
agricultural produce, production and sale of implements and 
manures, development of irrigation projects, insurance, consolida- 
tion of holdings, opening of state-aided dispensaries and schools, 
introduction of improved methods of cultivation, general village 
uplift, etc. On the whole, they have done good work in all these 
fields. A closer co-ordination between the Agricultural, Co- 
operative and Veterinary Departments can produce more sub- 
stantial results. It is through the development of this particular 
line of co-operation that the discoveries and teachings of agricul- 
tural and veterinary experts can be brought to the agriculturist in 
the village. Work of this nature is being done already* in Bombay 
by the District Village Uplift Committees, Taluka Development 
Associations and the Provincial Rural Development Board. 
Taluka Development Associations are registered, under the 
Co-operative Societies Act. They do propaganda for introducing 
better implements, better seeds and improved methods of 
culture* Better Farming Societies have been established in 
Bombay and in the Punjab and Madras. And good work has 
been done under the Rural Reconstruction programme in the 
Punjab and the United Provinces, especially through the forma- 
tion of Better-Living Societies. Though their primary object 
was curtailments of ruinous expenditure on marriages and other 
social occasions, yet they have also helped in various other, 
matters. They have levelled, paved and swept village lands, ^ 
promoted sanitation, improved ventilation in houses, repaired 
drinking wells, stopped waste in farms, etc. 

6. Co-operative Marketing Societies : Among the various 
kinds of agricultural non-credit societies Marketing societies 
deserve special attention. This is partly owing to the good work 
done by them in provinces like Bombay and Madras and partly 
because sometimes more is expected of them than they really 
can do. 

We have already seen in the chapter on marketing that the 
agriculturist seller suffers from many disabilities which do not 
allow him to get a fair return for his produce. His indebtedness 
to the money-lender, his lack of reserves, defective transport 
facilities, lack of warehouses, lack of information about price 
movements, corrupt practices in the markets etc., all seem to 
conspire to defraud him of his fair 'price. Marketing through 
co-operative societies has been suggested as a remedy. But too 


h Indian Year Book, 1943-44., p. 384% 



184 ECONOMICS OF INDIA AND PAKISTAN 

much should not be expected from co-operative marketing unless 
measures are taken to improve the fundamental conditions of 
marketing. For instance, co-operative marketing cannot achieve 
much unless the agriculturist’s dependence on the money-lender 
is removed, transport facilities are improved and proper ware- 
houses are made available. Moreover, the paucity of trained and 
honest personnel for co-operative marketing has also been an 
important handicap. 

Apart from these considerations co-operative marketing 
societies should not be introduced indiscriminately. Before 
creating a society for marketing of a specified community the 
conditions of its marketing should be carefully studied. The 
middleman’s charges are not always excessive. In many cases 
competition has cut the middleman’s profits very fine, co- 
operative marketing in such cases may bring loss rather than gain. 
It is also necessary to guard against the common notion, “ that the 
cultivator has only to hold up his produce and avoid glutting the 
market at the harvest time to get a much better return for it.”^ 
Experience has shown that holding up of produce by marketing 
societies for such a purpose has resulted in loss more often than 
in gain. Very expert handling is necessary in such cases. 

In spite of these limitations, however, co-operative market- 
ing has made fairly good progress in certain provinces. Cotton 
sale societies of Bombay are famous. They have set up factories 
for ginning and pressing of cotton and have organized themselves 
into sale unions for marketing of cotton. They have set up an 
example for organization for other marketing societies in Bombay 
and elsewhere. There are also societies for the sale of gur, 
tobacco, chilly, mango, paddy, arecanut, fruits and vegetables; 
The Bombay Co-operative Department has organized a Provincial 
Marketing Society. In Madras the common form is the loan and 
sale society. Such societies are co-ordinated by the Provincial 
Co-operative marketing society started in 1936. Distinctive work 
in the provinces is done in the field of marketing of sugarcane. 
These societies not only help the members to realise better prices 
but they also encourage them to introduce better methods of 
cultivation. Good progress is also made by the ghee sale 
societies. Sugarcane societies have also been started in Bihar. In 
other provinces the progress of co-operative marketing has not 
been much. In the Punjab there is the Okara Zamindari Sale 
Societies the members of which are mostly big zamindars. In 
Bengal sale societies for paddy, sugarcane and fish have been 


1. Reserve Bank Review, op. cit., p. 44» 



CO-OPERATION 


185 


organized. Successful cotton sale societies exist in Hyderabad 
and Baroda States. 

Some of the Provincial Governments have given assistance to 
marketing societies. In Bombay, Madras and C. P., long term- 
loans at low rates of interest have been given for construction ot 
godowns. Loan and sale societies of Madras are given subsidies 
by the Government to maintain adequately trained staff. 

7. Single versus Multiple Purpose Society; Recently a 
controversy^ has appeared in co-operative circles which demands 
our attention. The question is whether there should be roughly 
one society for tackling every separate problem of the 
cultivator — credit sale and purchase, improved methods and 
implements etc., or there should be single society whmh should 
take charge of all these problems over the area of a single 
village or a few villages together. So far the typical society 
in India has been a single purpose society, though some 
credit societies have performed functions like introduction 
of better seed and implements etc., and the better living 
societies also tackle the village problem in its yariom aspects. 
The question is, whether the multi-purpose society should 
made the typical society. The Reserve Bank of India has strongly 
advocated the cause of such societies. How the new society wui 
come about and how it will perform its functions according to 
the Reserve Bank, is shown in the following extract from one ot 
its publications: “Starting with credit for ? 

society may get the old debts of its good members liquidated 
through a land mortgage bank, introduce better business an 
better monetary return by inducing its members to sell eir 
produce co-operatively, ensure, their growing of the improved 
varieties of crops by purchasing seed for them, save on purchases 
by arranging for the purchase of their other needs lointly and at 
profitable rates on an indent system without incurring any ns or 
liability, save litigation expenses by effecting arbitratiori, iimrove 
the outturn of crops by consolidation of holdings, supply of gur 
seeds and improved implements, supplement the incoti^ 
members by inducing them to take to subsidiary industries, 
introduce better living measures by adopting bye-laws by comm 
consent, which will curtail ceremonial expenditure and remove 

insanitary habits, provide medical relief, and so on. ' 

“The comparative failure of usual credit co-o^ration, in 

the words of Prof. Beri, “ may be largely attributed to the tact 


1. See Reserve Bank’s Review of Co-operative 

20-26 • S G Beri in Indian Economic Journal (January 1942.) pp. 313 3:)i. 

2. Reserv^Ck of India : Review of Co-operative Movement, pp. 20-2. 



186 ECONOMICS OE INDIA AND PAKISTAN 

that it addressed itself to the solution of the problem of credit 
only and did not simultaneously take up a campaign against all 
the causes, which give rise to it and make for unbalanced budget 
of the farmer.”^ The farmer also does not like too many agencies 
to deal with. He has been accustomed to deal with the Sahukar 
for his various needs. The multi-purpose society' will be best 
fitted for the task. Because it is necessary that the peasant’s 
psychology of life must be changed, and if this is to be done it is 
necessary that he should be taken up as a whole man and that all 
the aspects of his economic life should be dealt with by the same 
agency.”^ 

Many benefits are claimed for the multi-purpose society ; 
Greater loyalty and sustained interest of members ; freedom from 
the evils of cash economy ; wider area of operation hence more 
economical and efficient , management, its utility in the moral 
uplift movement and the promotion of subsidiary industries con- 
nected with agriculture. It can serve as a good agency for the 
rehabilitation of rural life as a whole ; it will have a compre- 
hensive understanding of all the various problems that the 
agriculturist has to face. In any case a proper co-ordination of 
the various co-operative activities is necessary even if there are 
separate societies for each purpose. Multi-purpose societies can 
do it best. 

On the other land its opponents raise a number of objections 
against it, (e.g. Strickland at the Registrars’ Conference, 1939) : 
That the business ability of the villager may be overstrained ; the 
danger of its becoming cumbersome in mechanism and unintelligi- 
ble to the simpler members ; failure of one line of business may 
affect other lines. Then there are disadvantages due to the 
larger area of operations. It is held that on. account of the 
failure on the part of members to secure the necessary mutual 
knowledge and trust, an essential purpose of the co-operative 
movement will be defeated. Moreover, a small village unit is 
regarded necessary as a training ground. Then the limited liabil- 
ity of such a society is also objected to. 

In spite of these objections multi-purpose societies are find- 
ing an increasing number of supporters. The thirteenth Con- 
ference of Registrars of Co-operative Societies held at Delhi in 
December 1939 passed the resolution ‘^that provinces should 
experiment with multi-purpose societies to ascertain more clearly 
the conditions under which they are likely to thrive and the 


.1, S. G. Bieri W Indian . Economic Journal Conference No. January 1942y 
p516. ■ 



CO-OPERATION 


187 


form which they should take with special reference to their area 
of operations, liability and purposes/^ The Madras Committee 
on Co-operation also favoured the idea. -Such societies have 
worked successfully in other countries and with, better education 
and training of the staff many of the disadvantages of this form 
can be avoided ’ But its limitations should not be lost sight of. 
“ While we should appreciate the possibilities of employing it 
(multi-purpose society) under limitations to good purpose,” says 
Sir T. Vijayaraghavachariar, ‘‘ we should not cherish the illusion 
that it is going to change the farmer’s psychology and outlook on 
life. An intellectual revolution like that is not accomplised by 
change in machinery.”^ 

Multi-purpose societies, however, have been introduced in 
an experimental way in U.P., Bengal, C.P., Bombay and among 
the states in Baroda and Mysore. 

g — Non- Agricultural Co-operative Credit Societies. Such 
societies are found in the urban areas and follow the Shuke- 
Delitzsch^ model — large membership, limited liability, high 
dividends etc. These societies have taken the following main 
forms in India : 

(/) People’s Banks, — They are meant specially for the benefit 
of the middle-classes and are found chiefly in Bombay and 
Madras provinces. In Bombay their activities are co-ordinated 
by the Co-operative Banks Association. They help local trade 
and small artisan industries. The Madras Committee on Co- 
operation made several recommendations to improve their 
usefulness. 

{ii) Thrift and Life Insurance Societies, — ^The Punjab, Bombay 
and Madras have made fair progress in these societies. They 
collect small savings and encourage thrift. The bulk of the 
members of such societies (numbering about 1,000) in the Punjab 
are school-masters. 

(iii) Societies for Employees of large firms and Government Depart^ 
merits. — Their object is to encourage thrift and, savings among the 
small salary earners.. They have made good progress in Bombay 
•and Bengal and some progress in Madras. Their success is due to 
high degree of literacy of members and their fixed incomes. 

, (iv) Communal Societies, — ^These are formed among, and are 
useful for the education and uplift, of backward communities 
and castes. 

■ 1, Quoted by S. G. Beri, op. cit., p. 326. 

' - 2. See back p, 195 ior the Principles o£ Schulze-Delitzsch model. 



188 


ECONOMICS OF INDIA AND PAKISTAN 


(v) Artisans' Societies. — Most of them are formed by weavers^ 
others are the basket-makers, shoe-makers, carpenters, etc They 
usually follow the Raiffeisen model like the agricultural societies, 
and have made good progress in Bombay. 

(vi) Societies for Factory Workers —They provide cheap credit, 
promote thrift and carry on other social and educational activi- 
ties among the mill-hands. Indebtedness, illiteracy and migratory 
habits of such workers stand in the way of the development of 
such societies. They are mostly found in Bombay, Madras and 
Calcutta. 

(vii) Societies for Depressed Classes. — Their aim is to improve 
the economic conditions and raise the social status of the De- 
pressed Classes. They have not met with much success due to 
inadequate earnings of these classes and the tyranny and corrup- 
tion to which they are subjected. The working of urban credit 
societies on the whole has been satisfactory. There is, however, 
still considerable scope for improvement. The Madras Committee 
on Co-operation suggested continuous drive by urban banks for 
greater encouragement of habit of thrift through such devices as 

day deposits thrift certificates ” and “ hundi box and home 
safe. ’’ 

9. Non.Agricultural Co-operative Non-Credit Societies : 

These societies have made only a small .progress and have taken 
mainly the following forms : — 

(0 Artisans' Societies for Purchase and Sale. — An excellent 
example is the handloom industry where co-operative societies 
help the weavers in the purchase of raw materials, employment 
of improved looms and sale of cloth directly to consumers. They 
have shown good progress in Bombay, where the Government 
has helped co-operative weaving by running weaving schools 
under the Co-operative Department since 1935. District Indus-* 
trial Co-operative Associations have been established by the 
Government to help in the supply of raw materials, purchase of 
looms and sale of hatidloom products for the weavers. The 
controlling authority of the new marketing is a Joint Board 
consisting of the Director of Industries and the Registrar Co- 
operative Societies. Schemes of marketing of handloom products 
have also been introduced in some other provinces with fair 
success. Some progress on similar lines is also made in the case 
of artisans like shoe-makers, goldsmiths, cane workers, etc. The 
war has helped the cottage industries considerably. 

(a) Unskilled Labourers' Soc/etfes.— ‘These are chiefly found in 
Madras. They undertake contracts for earth work, road repairs^, 



COrOPERATION 


189 


etc. Mismanagement and opposition of private contractors are 
the chief difficulties in their way. 

(Ui) Consumers’ Societies in Urban areas. — Though the move- 
ment of consumers’ stores has not made much progress in this 
country in urban areas, yet it has made some progress. Such 
stores exist in Bombay, Madras, and the United Provinces. Some 
are attached to colleges, hostels and are well managed. Railway 
stores also have succeeded well. The chief difficulties in the way 
of the development of such societies are : Want of loyalty on 
the part of members and lack of good management and proper 
supervision ; and small margin between wholesale and retail 
prices to attract consumers ; strong outside competition ; absence 
of a large class of people with settled periodical incomes, etc. 
The movement has received a fillip in Madras due to the needs 
created by the war, 

(ivi Co-operative Housing Societies. — In towns like Madras, 
Mysore and Bombay, beginnings have been made in the direction 
of co-operative housing. In the town of Bombay such societies 
have been organized under the auspices of the Bombay Co-opera- 
tive Housing Association for the benefit chiefly of middle-class 
communities. Such societies are usually of two types, (a) those 
which buy land in common and assist members with technical 
advice, purchase of materials, etc., for building their own houses, 
(b) those that build houses and charge rent from members to 
cover cost of construction over a long period. Government in 
India assists house-building societies with grant of loans as well 
sometimes of a free site.^ 

10* Central Societies : So far we have been concerned only 
with primary societies. Now we come to the secondary societies 
which are formed to organize, supervise and finance the primary 
societies. These are Unions, Central Banks and Provincial Banks. 
The following table shows their relative numerical strength and 
importance — 

1940-41 

Number Working capital Membership 

Rs. Crores Individuals Societies 

(i) Union .. 466 15.96 ... 28,569 

(ii) Central Banks 601 29.32 79,834 121,292 

(Hi) Provincial 

Banks ... 10 13.89 4,537 18,838 

Membership of Unions is open only to societies, but in the 
tase of Central Banks and Provincial Banks the members may be 
individuals as well as societies. 

k Reserve Bank Review, op. cit., p. 67. 



190 


ECONOMICS OF INDIA AND PAKISTAN 


(0 Unions . — ^Unions may he of three kinds : 

(a) Ouaranteeing Unions (as in Burma and Bombay in the 

past). 

(b) Supervising Unions (as in Madras and Bombay). 

(c) Banking Unions (as in the Punjab). 

Unions are federations of societies within a certain area? 
managed by a committee representing the member societies. 
Guaranteeing unions guarantee loans given by the Central Banks 
to member societies. The unions perform the function of super- 
vision of primaries and also serve as banks between them and the 
central financing institutions. The system of supervision has not 
been found satisfactory. It is superficial and overlaps with the 
work done by the inspecting staff of the financing agencies. A 
banking union cpuld do the work of supervision in addition to 
finances. - . 

(a) Central Co-operative Banks.-^^The central banks have been 
organized since the passing of the Co-operative Societies Act, 
1912, to finance the primary societies and to act as their balancing 
centres. Such banka make it possible to draw capital from a 
larger field for the benefit of primary societies. They also help in 
adjusting and balancing the .excesses and deficiencies of working 
capital of primary societies within the area of their jurisdiction. 
Besides financing societies, they do other banking business like 
accepting deposits, collecting bills, cheques, etc. In some provinces 
they also advance loans to individuals against real property. Their 
area of operations varies in various provinces. It may be a tehsil, 
a taluka or a district. Central banks may be mixed or pure. 
Membership of mixed central banks is open to individuals as well 
as to societies, and the pure type is a truly federal central bank, 
and admits only societies as members. Mixed kinds arc more 
suitable to Indian conditions at present but the pure type should 
be the ideal. Pure types are found in the Punjab and Bengal and 
are generally, called Banking Unions. . 

As regards theif actual working, in Bombay, Madras, and the 
Punjab, they are comparatively in a sound position. But in Bengal 
Bihar, Orissa,' and C.P. and Berar their conditionisnot satisfactory. 

Many central banks in these provinces had to close their doors 
owing to inability to meet the withdrawals bf deposits.’’^ In 
general such banks show excessive overdues and bad debts which 
in many cases exceed owned funds of the central banks. Their 
failure in some provinces has been due to reckless over-financiiig 


1. Reserve Bank Review, opi cit.’, p. IZ. 



191 


Gp-OPERATION 

of societies; inefficient supervision, disregard of sound banking 
principles and defective organization of the primary units. 

(in) Ptovincidl CO'-opefative Banks . — They are apex banks which 
finance, co-ordinate and control the working of central banks in 
each province. They serve as clearing houses of the excesses and 
deficiencies of the working capital of central banks. They serve, 
moreover, as a link between the general money market and the 
co-operative primary societies in.the villages. Generally speaking, 
the apex bank does not deal directly with primary societies but 
through central banks, except in areas where central banks have 
not developed. In Sind, since central banks have been amalgam- 
ated with the Provincial Bank, the latter deals through its 
branches directly with the village societies. The constitution of 
provincial co-operative banks also vary in different provinces. In 
Bombay, Sind, Madras, C.P., Berar, Bihar and Assam the member- 
ship is open to societies and individuals ; in Bengal and the 
Punjab only societies can become members. Their financial 
position is on the whole much sounder than that of the central 
banks. 

The need for an All-India Co-operative Bank was stressed by 
the Maclagan Committee. But since then opinion in this regard 
has undergone a change, due to superfluous resources available 
with the provincial banks, the accommodation available with the 
Imperial and other banks and to the fact the co-operation is now 
a provincial subject and wants development on independent lines 
according to local conditions. Moreover, provincial inter-lending 
on spontaneous basis has developed, assisted by the Indian 
Provincial Co-operative Banks Association. Finally, the need for 
an all- India apex bank is not so great now because of the 
establishment of the Reserve Bank of India. 

11. Reserve Bank and Agricultural Finance ; The Reserve 
Bank does not directly finance agricultural operations on account 
of the great financial responsibility on this central institution 
and the risky character of agriculture as a business. Indirectly, 
however, the Bank is doing useful work by creating conditions 
favourable for financing of agriculture, by giving expert advic^ 
and by publication of useful literature relevant to the problem of 
agricultural co-operative finance. Thus 

(0 The Reserve Bank of India Act (1934) allows the Bank to 
sell -and rediscount agricultural bills and promissory notes endors- 
ed by a scheduled bank or a provincial co-operative bank, drawn 
for the purpose of financing seasonal agricultural operations, or 
the marketing of crops, and maturing within nine months. 



192 


ECONOMICS OF INDIA AND PAKISTAN 


(//) It is further authorized to make loans and advances for 
ninety days to provincial co-operative banks, and central land 
mortgage banks (declared to be provincial co-operative banks), 
and through them to co-operative central banks and primary 
land mortgage banks, against specified securities, viz^, Government 
paper and certain approved debentures and approved promissory- 
notes, 

{in) The Bank has established an Agricultural Credit Depart- 
ment whose function it is to study all questions of agricultural 
credit and offer expert advice to Government and Co-operative 
banks, and to co-ordinate the operations of the Bank in connec- 
tion with agricultural credit and its relations with provincial 
co-operative banks and any other institution engaged in agricul- 
tural finance. This Department submitted its Statutory Report 
on Agricultural Credit to the Government in 1937, and since 
then has issued a number of bulletins on the working of the co- 
operative movement in certain localities and has published an all- 
India Review of the Co-operative Movement, 

This is useful work, but a considerable weight of popular 
opinion would like to see the Reserve Bank less conservative in 
its policy towards agricultural finance. No doubt the Bank can- 
not supply normal finance to any of the credit agencies, it should 
come into the picture as a lender of last resort, when ordinary 
sources of commercial credit appear inadequate for seasonal 
demands of business. Like the commercial banks the co-opera- 
tive banks must ordinarily stand on their own legs. The Bank, 
moreover, must insist that co-operative banks should follow 
sound banking principles and keep the Bank informed of their 
position by periodical statements. The Bank does issue instruc- 
tions and advice to co-operative banks by issuing circular letters 
from tirne to time. So far so good. But popular view would 
like to see the Bank giving more direct and adequate help to 
agriculture through co-operative agencies. For instance, the 
Bank does not grant at present cash credit facilities to co-opera- 
tive banks. This is regarded by some writers as an ultra-con- 
servative view. It is also suggested that the scope of the func- 
tions of the Agricultural Credit Department should be extended, 
and early steps should be taken to bring the indigenous bankers 
directly within the orbit of the Reserve Bank. 

12, Non*oiBcial Co,.opefative Agencies : In recent years 
certain non-official co-operative agencies have come into existence 
to serve as focus of co-operative activity, and clearing houses of 
information about co-operative problems, arising in the various 



CO-OPERATION 


193 


provinces, to further co-operative education and to advance the 
interests of the co-operative movement in a variety of ways. 
Some of these are noted below ; 

(/) The Bombay Provincial Co-operative Institute is recognised 
under the Bombay Co-operative Societies ^Act (1925). It serves 
to focus the co-operative activities of the province, and holds 
provincial co-operative conferences. The Government gives the 
institute a grant for its work of training and publication of 
co-operative literature. Its main function is to impart co-opera- 
tive education which function it shares with the Government, 
The Bombay Government is thinking of reorganizing the institute 
under a new constitution. Its main function will be to impart 
co-operative education to members of co-operative movement. It 
will also serve as a centre to focus non-official opinion on subjects 
connected with the movement. 

(//) Since October 1929, there also exists an All-India Co- 
operative Institutes Association which sfeeks to promote and 
extend the co-operative movement through the member institutes 
and gives them advice and assistance on co-operative matters. 

The Indian Provincial Co-operative Banks Association is 
another all-India co-operative organization. Its object is to 
further common interests in matters of finance, legislation and 
administration. 

13. Achievements of G 0..0 eration ; The co-operative 
movement has been subjected to the searchlight of criticism by 
various writers, committees and commissions. Apart from the 
various committees on co-operation appointed by the various 
provinces and the Maclagan Committee, views have been 
expressed in this connection also by the Agricultural Commission 
and the Central and Provincial Banking Enquiry Committee. 
The achievements of the movement and its possibilities have 
obtained high praise on the one hand, and on the other by some 
writers it has been regarded as an utter failure, to be liquidated 
at the earliest moment. Among the achievements^ claimed for 
the moment are ; 


1. Below are given vxewa of some authorities regarding the achievements 
of the movement : — 

** Knowledge of the »co-opcrative system is now widespread ; thrift is being 
encouraged ; training m the handling of money and in the elementary banking 
principles is being given, where the co-operative movement is strongly establish- 
ed, there has been a general lowering of the race of interest charged by the 
money-lender, the hold of the money-lender has been loosened, with the result 
that a marked change has been brought about in the outlook of the people.’* 
('Agricultural Commission). 



194 


ECONOMICS OF INDIA AND PAKISTAN 


(i) That it has led to an all-round reduction in the rates of 
interest in .the rural areas. 

(ii) That it has encouraged the hahit df saving and in- 
vestment. 

{Hi) That it has led to the decrease in consumption borrow- 
ing. 

(iv) That it has contributed to the growing morality and 
independence of outlook among the cultivators. 

(v) And, finally, that it has created an increasing interest in 
rural matters in the minds of urban capitalists and workers. 

To this the critics of the movement reply that many of the 
above results are qualitative and hence difficult to measure, and 
that, even if such results have been achieved, they are associated 
only with the best societies, the number of which is no£ great. 
On the other hand, they emphasize the fact that the co-operative 
movement in India h^s been almost exclusively occupied with 
the problem of rural credit and even in that field its achieve- 
ments are not very remarkable. Even the official body like the 
Central Banking Enquiry Committee had to admit that “ there is 
very little evidence about the reduction of total indebtedness 
through the agency of the co-operative credit societies, for they 
are not in a position to finance the agriculturists adequately for 
the discharge of old debts.” The various Provincial Banking 
Enquiry Committees also noted that only a small percentage of 
the current needs of agriculture is supplied by co-operative^ 
societies. It is further pointed out that tire official figures of the 
number, membership and. capital of the societies are unreliable.-^ 
Event' on the basis of these figures, the movement has only, 
touched a smalP proportion of the total population of India. 

This criticism-contains a substantial element of truth. But 
considering the limitations under which the movement has 


It is difficult to give conclusive evidence of this (moral progress) as the'^ 
signs of moral progress are too elusive to be pinned down in a statement of 
facts, but for all that they are unmistakable to close observers of the movement. - 
Litigation and extravagance, drunkenness and gambling are all at a discount in 
a good co-operative society; and in their place will be found industry, self- 
reliance and straight dealing, education and arbitration societies, thrift, self-help 
and mtitual help iM. L. Darling), 

1. For examples of defective presentation of figures sec S. K. lyengar^s 

article in Economic Journal, January 1942, pp.JO6-406. ‘ 

2. Sec back, Table on p. 178. 

" All that has been done amounts only tor a’ scratching of surface ” (Sit M- 
Visvesvaraya). 



CO' OPERATION 


'195 


developed in this country,- it lias made remarkable progress'and 
has resulted in a lasting benefit to the Indian peasantry. Owing 
to cheapness of credit that it has made available, it has' resulted 
in savings for trhe agriculturist which are estimated at about one 
crore of rupees. It has restricted debts by establishing a system 
of controlled credit and has weakened the vicious system of 
moneydending, that used to prey upon the ignorance of the 
peasant. Non-credit side of the movement is also receiving 
increasing attention, and it has conferred considerable moral and 
material benefits on the rural classes. 

14. Defects of the Movement : This, however, does not 
mean that serious defects do not exist in the working of the 
movement. Among the alleged defects^ are : — 

(a) Want of due supervision ; (Jb) undue delay in financing ; 

(c) financing more on the basis of assets than on paying capacity ; 

(d) indiscreet loans ; (ej contumacy - of borrowers ; (/) unpunctu- 
ality in repayment ; (g) restriction of loans to a few favoured 
, individuals ; Qi) dishonesty and incompetence of Government, 
bank and society officials; (0 bad selection of members; (j) 
membership spread over too large an area ; (k) concealment of 
old debts; (1) faulty constitution; (m) internal dissensions; (n) 
inadequacy of funds ; (o) preponderating influence of One or a 
.few member^ ; and (p) general lack of interest of members in the 
affairs of the society. 

Further, the following are pointed out as the dangers of the 
movement: — 

(0 The tendency to , officialize the movement too much, and 
leave too little to private initiative ; 

(it) the eagerneas of too enthusiastic organizers to rush the 
pace of the movement at the expense of intensive development ; 

(Hi) the opposition of the money-lending class, which has 
been growing in persistence ; 

(iv) a few of the members monopolize the work and leave 
too little room for the incentive of others ; and 

(v) abuse of power in the collection and distribution of funds. 

The above-given defects and dangers are merely symptoms of 
' the basic of shortcoming — i.e., the absence of the co-operative 
spirit. In Western countries much more is expected of co-opera- 
tion than mere material well-being through the supply of credir 


i. S. K. Iyengar, op. cit., pp. 401-2. 



196 


ECONOMICS OF INDIA AND PAKISTAN 


and other needs of the farmer. It is expected to transform the 
whole human being, his personality, character, attitude to the 
'community and attitude to life/’^ Co-operation in the West has 
to a large extent realised these expectations. Co-operation in 
India has utterly failed to achieve anything of this sort. What 
is the reason ? The basic reason is that there are certain condi- 
tions which are necessary for its success. These conditions are 
present in countries where co-operation has worked successfully ; 
they are absent in India. 

15. Conditions of Success : The most remarkable results 
have been achieved by co-operation in Denmark. Some people 
think, what Denmark can achieve India should also be able to 
achieve. But, as has been pointed out by Sir John Russell, “ four 
essential conditions of success are all present in Denmark : — 

(1) The village population is homogeneous ; there is nothing 
corresponding to caste distinctions. 

(2) The cultivators are literate, 

(3) From the outset People’s High Schools were set up where 
cultivators were taught better living both in the home and the 
village and where ideas of corporate responsibility in village and 
national life were inculcated. 

(4) The co-operative societies are mostly trading societies, 
taking over the produce from the cultivator, working it up into 
marketable form and selling it for him. Also they supply him 
with all materials for use in the home and on the farm. They 
are merely financed by the local banks and members are jointly 
and severally liable for the loan. As depositors the members 
provide a substantial part of the funds ; it is their own money 
that is lent to members, and in consequence each borrower feels 
himself under the necessity of repayment.”^ 

All these conditions are. absent in India. Indian society is 
not homogeneous ; castes and creeds divide it into exclusive if not 
warring groups with contradictory aims. The percentage of 
literacy in rural areas is negligible. There are no educational 
institutions corresponding to the People’s High Schools of 
Denmark. Corporate responsibility is entirely absent. The culti- 
vators are too poor to be able to provide a substantial part qf the 
funds of local banks. Those who have money are afraid of losing 
it since liability is unlimited. 


1. Co>operative Action in Rural life : Survey by International Labour 
Office, p. 30, 

2. Russell Report, p. 63, 



CO-OPERATION 


197 


In fact one of the chief cause of the slow growth of co-opera^ 
tion in India is the mea^e incomes of the masses. A vast 
majority of the peasants lack means even to become members of 
the societies. In the words of the Bengal Provincial Banking 
Enquiry Committee “ at the one end of the scale there are people 
who are so well off that they do not desire to incur the risk of 
unlimited liability by enlisting themselves as members. At the 
other end there are persons who are so poor that they are refused 
membership. It is, therefore, not unfair to assume that the co- 
operative population represents the medium agricultural popula- 
tion.’’^ 

But should we despair about the future of the movement ? 
Not at all. For one thing co-operation short of wholesale 
socialism is the only hope of our rural masses. We must make 
the best of it in spite of adverse character of the environment. 
That co-operation can succeed in this country is evident from 
certain excellent results achieved by some provinces, especially in 
the non-credit field. Cotton and gur sales societies of Bombay, 
consolidation of holdings societies of the Punjab-sugarcane supply 
societies of the United Provinces and Bihar and irrigation 
societies of Bengal, can bear comparison with the best of their 
kind in the world. With the spread of education and greater 
co-operative experience, with the transfer of larger powers 
into the hands of the common people and greater social reform, 
there is no reason why co-operation should not achieve a marked 
success in this counti^. In the meantime certain immediate 
reforms have been suggested by the Agricultural Credit Depart- 
ment of the Reserve Bank of India. These may be noted. 

16. Suggestions for Improvement ; The need for reorienta^ 
tion of the movement is more urgent now than ever. The recent 
rural legislation, regulating and controlling the activities of the 
money-lender, has tended to reduce the credit of the agriculturist 
with the money-lender, and it is necessary that alternative sources 
of credit should be made more effectively available for the various 
legitimate needs of the peasant. The publications issued by the 
Agricultural Credit Department of the Reserve Bank have made 
some valuable suggestions in this connection which may be taken 
note of : — 

(0 Separation of overdue and long-term loans of co-opera- 
tive societies from short-term loans and putting them on a proper 
footing. This involves scaling down of overdues and arranging 
for their payment either by sale of the members’ assets or through 


1, B.B, Enq, Com., Report, p. 69. 



198 


ECONOMICS OF INDIA AND PAKISTAN 


the agency of land mortgage banks, making payment possible by 
means of , instalments^ over a period of years. In the meantime, 
fresh finance should- be supplied for cultivation and other 
necessary expenses, preferably in kind.^ 

(a) Societies should ^ build large reserves by increasing the 
margin between borrowing and lending rates in order - to enable 
them to tide over unfavourable seasons and to meet unexpected 
losses. Here caution is necessary because too high a rate might be 
beyond the paying capacity of the peasant. 

(m) Loans should, as far as possible, be given only for pro- 
ductive purposes. For other needs, only the smallest minimum 
should be allowed, though care should be taken that too much 
rigidity in this connection does not throw the cultivator on the 
mercy -of the money-lender. 

(iv) Reconstruction" of the primary credit society to make 
it a multi-purpose society is also recommended. We have 
already examined, this subject in a previous section. 

(v) It is suggested that primary societies should be federated 

into small Banfcng Unions (as at Kodinarin Baroda State). This 
will economize energy and avoid, waste, because the .functions 
of finance,' supervision and education, which are now in the 
hands' of a .number of agencies, will be concentrated in the 
hands of one agency. . ‘ . 

(vi) Special emphasis is laid on the development of co-opera- 
tive marketing of agricultural produce. The development should 
start from the bottom, primary societies taking up . the joint 
marketing of the produce of their members, these further to be 
linked up with larger central sale societies. 

(v/f) The central and provincial co-operative banks should 
be reorgjanised.' “The larger and unwieldy central banks should 
be split up into suitable banking unions, even if the central co- 
operative bank is to be retained.” The central banks should 
guide and assist the primary* societies in their operations and the 
training of the members in the principles of co-operation. Simi- 
larly, the provincial banks should play a larger part than hitherto 
in the direction of guiding the movement. These central institu- 
tions, xporeover. should maintain adequate liquid reserves and 
,should establish closer contacts with first-class commercial banks, 
to’ be greater service to ,- the primary societies and the 'movement 
as a whole. 


9. Reserve Bank’s Review, op, cit.^ p, ,16-^7# 



CO-OPERATION 


199 


(viii) Finally, arrangements "should be made for intensit^e 
training of the j staff of the co-operative departments in the 
principles, of co-operation, rural economics arid banking,^ 

Even after having been thus reorganized, the co-operative 
movement will require the establishment of social institutions to 
meet the demands for long-term credit* 

17. Long-term Credit : The agriculturist requires long- 
term credit principally for two needs* /.e., for settlement of old 
debts and for land improvements* We see that the Government 
gives loans for land improvements under the Land Improvement 
Loans Act, 1883, but owing to various reasons such loans are not 
adequate for this purpose* Moreover, this does not provide for 
loans for settlement of old debts. The ordinary primary co- 
operative society is not fitted by its very constitution to provide 
long-term credit. Its resources are limited and cannot be locked 
up for long periods. The need for long-term credits has become 
specially urgent due to the various debt conciliation schemes, 
introduced in recent years by' legislation, in order to free the 
peasant from the burden of ancestral debt. One solution, which 
is now being increasingly recommended, is the establishment of 
Land Mortgage Banks, especially of the co-operative type. 

A land mortgage bank is an institution which gives loans on 
the security of land mortgaged with it* The loan is as a rule for 
long periods. Such a bank may be organized as a co-operative 
bank, a non-co-operative bank qr a quasi-co-operative bank, the 
last combining features of a co-operative and a commercial insti- 
tution. Most of the Indian banks are quasi-co-operative. The 
co-operative type is the ideal, but in order to attract business 
talent and larger amounts of capital from bigger capitalists, non- 
horrewing persons are. allowed to hold shares and limited liability 
is introduced. Valuation of land is effected to trained officials 
lent by the Government and loans require the previous sanction 
of the Registrar* 

The credit for the establishment of the first co-operative 
land mortgage bank goes to the Punjab, in which province such a 
bank was established in 1920 in jhang. In the next ten years 
their number increased to twelve, but since the depression it has 
been reduced to ten. The banks have not proved very successful 
in the Punjab. ‘‘ The success of land mortgage banks,’’ says the 
Reserve Bank’s, Revicv^*depends to a considerable extent on 
accurate assessment of the value of the land offered as security 
and the annual repaying capacity, adjustment of loans and the 


1. For details sec Reserve Bank’s Review, chapter VIL 



200 


ECONOMICS OF INDIA AND PAKISTAN 


terms of repayment thereto and the recovery of the instalments 
punctually.” ^ The depression led to the fall in land values, and' 
also the extent of the Land Alienation Act, according to some 
critics, has contributed to their failure. Add to this the default 
of the directors and honorary workers, who were themselves large 
borrowers. The question of their reorganization is receiving the 
attention of the Government. 

Steps have also been taken in other provinces to introduce 
such banks. In Bombay there are 17 such institutions working in 
selected districts. In the C. P. ten such banks were established 
by the Government (guaranteeing capital and interest to the 
extent of Rs. 50 lakhs) in 1935, and eleven more have been 
started since. The most remarkable progress has been made in 
Madras, where there are 119 land mortgage banks now at work. 
Bengal, Assam and the United Provinces each possess five and 
Orissa has only one. 

^ In organizing land mortgage banks care should be taken that 
the constitution and working should be simple, management 
efficient and punctual and money should be advanced only if it is 
likely to be really profitable to the borrowers. This is necessary in 
the interest of holding the confidence of the public. The State 
can ensure their success in many ways : by giving guarantees for 
the repayment of principal and interest on debentures, by purchas- 
ing a portion of debentures, by granting special facilities and 
privileges similar to those enjoyed by co-operative societies, etc. 

It should be particularly noted that land mortgage banks have 
serious limitations and too much should not be expected from 
them. Firstly, it is not possible for them to transfer to themselves 
the entire burden of agricultural debt. They work under certain 
necessary restrictions as to the maximum limits of loans they can 
advance, they require security of landed property and have to 
select borrowers carefully. Secondly, such banks can only reduce 
the burden of debt, they cannot remove it altogether. Unless the 
agriculturists themselves act prudently and exercise thrift and 
caution as regards their unproductive expenditure, it is impossible 
to save them from the burden of debt. The Reserve Bank,^ in 
fact, has sounded a note of caution regarding the almost exclusive 
attention that is being paid to the reduction of old debts. Long- 
term credit should be increasingly made available for permanent 
agricultural improvements, which alone can solve the problems of 
the peasunt’s poverty. 

1. Iha.p. 38. ' 

2. Ibid. 



CHAPTER IX 


THE STATE IN RELATION TO AGRICULTURE 

1, Introduction : What part does the State play in relation 
to Indian agriculture ? In every country the State has to perform 
the basic functions of preserving law and order, recognition of 
rights in property and enforcement of contracts. Without such 
protective activities no economic life is possible. We have 
already discussed some of the functions the State performs in 
relation to Indian agriculture, apart from the above basic func- 
tions. The State has constructed huge irrigation works, extensive 
roads and railways ; it provides credit for agricultural improve- 
ments, though on a limited scale ; it has initiated, and it controls 
and supervises, the co-operative movement; and it has passed 
many legislative measures for the protection of the tiller of the 
soil from the money-lender and the landlord. Moreover, through 
its Medical, Public Health and Veterinary Departments, it seeks 
to preserve and improve the health of the agriculturist and his 
livestock. With reference to the latter, it has established and 
maintains special cattle-breeding farms to improve the breeds. 
The Education Departments also da their little bit to spread 
literacy in the rural areas. There are certain activities of the 
State, however, that still remain to be discussed, and discussed 
with a certain amount of detail. Such activities are : — 

(a) Actimties in connection with the improvements in the. methods 
of carrying on agricultural operations. — They are undertaken 
primarily by the Provincial Agricultural Departments with 
valuable help from the Central Government agencies and institu- 
tions. These involve (0 agricultural research, with regard to seed, 
manure, implements, pests and diseases, etc.; (ii) agricultural 
education, aiming at producing agricultural research workers, 
officers for the Agricultural Departments and practical farmers ; 
and (Hi) popularization of results achieved through research by 
propaganda, distribution of seeds and implements, etc. 

(b) Rural Reconstruction.-— This is an activity of a wide scope 
involving both official and non-official effort. It aims at raising 
the material, mental and moral level of village life as a whole. It 
involves, through suitable agencies, bringing to the door of the 
villager in a practical form, the benefits that the various beneficent 
departments of the Government can confer on him. 



202 


ECONOMICS OF INDIA AND PAKISTAN 


(c) Famine Relief Policy.^This involves the relief of distress 
among the rural classes arising out of the failure of crops due to 
failure or scantiness or untimely rainfall or any other reason* 

(d) Land Revenue Policy.— This concerns primarily not what 
the State gives to agriculture,, but what the State demands from it* 
But it may have a relief aspect, when during periods of agricultural 
distress, the State inay reduce, suspend or remit the land revenue 
charge. In fact, the land revenue policy has a lot to do with 
agricultural prosperity* 

Let us take the Agricultural Departments first, 

2. Evolution of Agricultural Departments : The idea of 
establishing a “ Department of Agriculture was mooted as early as 
1866, but it was not until 1870 that the Department of Agricul- 
ture, Revenue and Commerce was created by the Government 
of Lord Mayo, Due to lack of sympathy from Whitehall, 
however, this Department gradually degenerated into a Revenue 
Department, and was finally absorbed in the Home Department. 

In 1880, at the recommendation of the Famine Commission, 
the Central Department of Agriculture was re-established, and 
also, provincial departments were created* The provincial 
departments concerned themselves at first with agricultural 
statistics* Experimental farms, however, were opened at Saidapet. 
(1871), Poona (1880), Cawnpore (1881), and Nagpur -^883)* 

In 1889, Dr. J. A. Voelcker of the Royal Agricultural Society 
was appointed to enquire and report on the improvements of 
Indian agriculture. His monumental Report appeared in 1893. 
He emphasized the need for better irrigational facilities and the 
use of better manures. He attributed low productivity to 
smallness of holdings, want of capital, rural indebtedness and 
defective land tenures. He laid stress on the need for detailed 
scientific investigation regarding agricultural practice in India. 
He gave a warning against the belief that Western knowledge 
could simply be grafted on Indian practices. This report was 
followed by some appointments to the scientific staff of the 
Imperial Department of ‘Agriculture* 

In 1898 Sir Frederick Nicholson suggested that the Govern- 
ment should turn from agricultural enquiry to agricultural 
improvement*. In 1901 the Famine Commission opined that “the 
steady application to agricultural problems of research is the 
crying necessity of the times.” The Commission recommended : 
(0 a strengthening of the staff of Agricultural Departments in all 
provinces (if) further legislation bn the. lines of the Punjab Land 



THE STATE IN RELATION TO AGRICULTURE 


203 ' 


Aliemtion Act 1901 (///) introduction of cb-operative credit 
societies on German lines. The Irrigation ‘ Commission of 1903 
also emphasized importance of agricultural research and improve- 
ment. . 

In the meantime in as early as 1890 an Agricultural Chemist 
to the Government of India had been appointed. In 1901 the 
first Inspector-General of Agriculture was appointed. The same 
year was added an Imperial Mycologist. In 1903 an Imperial 
Entomologist was appointed. The same year an American, 
Mr. Henry Phipps, donated a sum of £30,000 for scientific research 
in India. Lord Curzon devoted the greater part of this sum to 
the establishment of the Imperial Agricultural Research Institute 
at Pusa. 

The reorganization of the Department of Agriculture that 
took place in 1905 provided for a Central Research Institute at 
Pusa, completely staffed Provincial Departments of Agriculture, 
with agricultural colleges and provincial research institutes and an 
experimental farm in each important agricultural tract. 

In 1906 the Indian Agricultural Service was constituted. 
Other central institutions that were created in subsequent years 
were : The Imperial Cattle Breeding Farm at Karnal, the 
Creamery at Anand and the Impetial Sugarcane Breeding Station 
at Coimbatore. This latter is a branch of the Imperial Institute 
which was transferred from Pusa to New Delhi after the Bihar 
Earthquake of 1934. . 

Institutions and departments were also established in connec-^ 
tion with animal health. The Imperial Institute of Veterinary 
Research at Muktesar started in 1893 as a small laboratory for 
research on rinderpest later became a fully equipped research, 
institute. The Civil and Veterinary department was formed in 
1891 and was under the control of the Inspector-General until 
1912, This department was completely provincialised in 1919. 
The Government of India, however,^ continues to finance and 
control the Muktesar Research Institute and its branch station at 
I-zzatnagar (Bareilly). 

3. Agricultural Policy since 1919 : Under the Reforms of 1919- 
agriculture became ,a provincial transferred subject ^d the 
Veterinary Department was also provincialised. The Central- 
Government still had some powers of supervision, direction 
control over transferred* subjects but it could not incur experdi- 
ture from Central Revenues on provincial subjects, except on 

1. Agricultural colleges were sstablishcd at Poona, Cawnpofc, Nagpur, 
CoUubatore, Sabour (closed in 1921), Patna and Mandalay (opened in 1924.) 



204 


ECONOMICS OF INDIA AND PAKISTAN 


agricultural research and training of research Workers in the 
Central Institutions. The various Central institutions, however, 
continued to be under the Central Government. 

The provincial ministries during Dyarchy (1921-1937) were 
not able to do much for agricultural development beyond some 
extension of irrigational facilities. One of the reasons was that 
finance was still a reserved subject and thus beyond control. 
This deficiency was removed by the scheme of Provincial Auton- 
omy which was inagurated from the 1st of April 1937. But in the 
meantime from 1930 onwards Indian Agriculture was overwhelm- 
ed by the great economic depression. While the need for help 
in the face of disappearing incomes of the peasantry was great, the 
government’s axe of economy was busy cutting expenditure which 
affected mostly the nation-building departments including agri- 
culti:re. Up to the outbreak of the World War 11 in 1939 the 
Indian agriculture was still in a depressed state. It had not 
regained its position of 1929, When the war broke out the 
attention of the Government was directed to this new emer- 
gency. 

Our trouble all along has been that from the Reforms of 
1919 onwards, while the main responsibility of agricultural dev- 
elopment was being shifted from the centre to the provinces, 
the main expanding sources of revenue were being preserved for 
the centre, while the provinces had to rely on those sources of 
revenue (mainly land revenue) which had very little scope for 
expansion. In fact land revenue burden had to be reduced if 
full justice was to be done in the distribution of burden of taxes. 
No wonder, therefore, that the Provincial Governments could 
do very little to stimulate agricultural progress. The most they 
have done in recent times is to pass certain protective measures 
to save the tenant from exploitation by the money-lender, the 
landlord and the middleman. These measures have been received 
our attention elsewhere. 

An event of great importance for the agriculturist during 
the period between the two wars was the appointment of a Royal 
Commission on Agriculture, It is necessary to know something 
about this commission, 

4, The Royal Commission on Agriculture : In the mean- 
time a Royal Commission was appointed in 1926 *^to examine and 
report on the present conditions of Agriculture and rural 
economy in British India and to make recommendations for 
the improvement of agriculture and the promotion of the welfare 
and prosperity of the rural population and in particular to 
investigate ; — 



THE STATE IN RELATION TO AGRICULTURE 


205 


(a) the measures now being taken for the promotion of 
agricultural and veterinary research, experiment, demonstration 
and education : for the compilation of agricultural statistics ; for 
the introduction of new and better crops and for improvement 
in agricultural practice, dairy farming and the breeding of stock ; 

“ (h) the existing methods of transport and marketing of 
agricultural produce and stock ; 

(c) the methods by which agricultural operations are 
financed and credit afforded to agriculturists ; 

“ (d) the main factors affecting the rural prosperity and 
welfare of the agricultural population ; and to make recommend-* 
ations/’ 

The problem of land revenue and land tenure was excluded 
from the scope of the Commission’s enquiry. This was unfor- 
tunate. Since these are among the basic problems of Indian 
agriculture. The Commission issued a comprehensive report in 
1928 and since then it has formed the basis of all fruitful 
discussion and Government action in matters relating to the 
subject discussed by the Commission. 

The recommendation of the Commission cover a very wide 
field including subjects like subdivision and fragmentation of 
holdings, improvement of livestock, irrigation, marketing, co- 
operation, rural education and rural reconstruction. Generally 
speaking, the aim of the recommendations has been to bring about 
greater efficiency throughout the whole field of agricultural 
production. In order to render the business of farming more 
profitable to the cultivator. They emphasized the necessity of 
widening the outlook of the peasant and stressed the importance 
of Government initiative in promoting agricultural progress. One 
of their basic suggestions was that the rural problem should be 
tackled as a whole in all its various aspects simultaneously. 

One of the most important recommendations of the Royal 
Commission was the creation of the Imperial Council of Agricul- 
tural Research “ to promote, guide and co-ordinate agricultural 
research throughout India and to link it up with agricultural 
research in other parts of the British Empire and in foreign 
countries.” This Council was established in 1929, We shall 
examine its organization and activities in a later section. 

5, Organization and function of Provincial Agricultural 
Departments : After this brief historical review let us now 
study the organization and functions of the Provincial Depart- 
ments of Agriculture, As a rule the Provincial Department of 



206 


ECONOMICS OF INDIA AND PAKISTAN 


Agriculture is in the charge of a Minister of Agriculture^ who is 
the political head. The administrative head of the department 
is the Director of Agriculture under whom there are Deputy 
Directors, Assistant Directors and Extra Assistant Directors of 
Agriculture. Below them are Agricultural Assistants and other 
field workers. ' 

The functions of the Provincial Department comprise the 
supervision and control of (a) Agricultural Education (h) Agricuh 
tural Research, (c) Demonstration and Propaganda, (d) Distribu- 
tion of improved seeds, implements and artificial manures, etc. 
Agricultural colleges impart agricultural education both theoretical 
and practical. They also carry on research on agricultural 
problems, either independently, or under the guidance of the 
Imperial Council of Agricultural Research, if the subject is of 
alUndia importance. The research relates to‘ the evolving of 
better varieties of seed from the point of, view of yield and disease 
and drought-resisting qualities, pests and disease to which crops 
are subject, better implements and manures etc. The results of 
this research are then tested on experimental farms, attached to 
the colleges or the research institutes. The next step is to 
demonstrate them on model farms or demonstration plots 
located in the villages. Their success is thus proved to the 
cultivator under his own conditions. Then arrangements are 
made to produce and supply the seed, the implements or the 
manures whatever the case may be to the cultivator. The 
improved seed is produced on a large scale on Government seed 
farms or is purchased from private producers if necessary. Simi- 
larly implements are manufactured under the guidance of the 
department. The sale is arranged through stores or depots 
maintained by the department at convenient places. The help 
of co-operative societies is also taken, if available, to approacia 
the cultivator. - , . 

6. The Indian Council of Agricultural Research ; We 

have already seen how, on the recommendation of the Royal 
Commission, the Imperial Council of Agricultural Research was 
established in 1929 to promote, guide and co-ordinate Agricul- 
tural Research. This Council works through two organs : (a) A 
Governing Body to manage the funds etc. and other affairs and 
(b) an Advisory Board to examine proposals for research and 
submit them to the Governing Body. Originally the Secretariat 
of the Imperial Council was constituted a department of* the 
Government of India. Since January 1939, however, the connec- 
tion between the Government of India and the Secretariat 
is through the Department of Education, Health and- hands. 



THE. ST ATE IN RELATION TO AGRICULTURE 207 

There are now two expert officers of the Council designated as 
the Agricultural Commissioner and the Animal Husbandry 
Commissioner with the'' Government of India respectively. 

In 1940 an important measure, the Agricultural Produce Cess 
Act, was passed hy the Central Legislature. The object of the 
Act is to finance the research programme of the Council by 
levying an export cess of k per cent ad valorem on certain specified 
commodities. 

The Imperial Council makes grants for specific purposes to 
universities and Provincial Departments of Agriculture for re- 
search along approved lines. The Council usually does not 
undertake direct investigation but in two cases it has undertaken 
direct control (/) the cost of production specially of cotton and 
sugarcane and (rV) statistical control of agricultural experiments. 
Several schemes of the Council have been carried out through 
the various institutions and institutes. In the words of the 
Russell Report, a vast amount of primary work extending over 
wide range has been accomplished/’ The Report recommended 
that a stage is now reached when a reorientation of the 
Council’s activities should be reconsidered.” The great need of 
the hour is “ a fuller use of existing knowledge rather than the 
accumulation of mere knowledge, for work on the cultivator’s 
field rather than in the laboratory.” 

Following the recommendations of the Report the Imperial 
(now Indian) Council of Agricultural Research has undertaken an 
examination of the methods of demonstration and propaganda 
at present in use. It has now put forward a scheme which aims 
at putting across a whole group of tested improvements simul- 
taneously, instead of one item hitherto, and to observe the 
combined effect of all these on the cultivator’s income and on 
the land. The improvements will be carried out by the cultiva- 
tor, himself instead of by Government staff as hitherto. The 
supervision, however, will be by the Government officials. 

7. Development Commission : The Russell Report has 
further recommended that a Development Commission, which 
could be combined with the Council should be set up. The 
Commission should plan large-scale improvements and suggest 
ways of raising the standard of living in the villages. It is 
recommended that the Commission should take up the following 
problems : — 

(a) Soil conservation, deterioration and loss of soil, exhaus- 
tion and manuring, soil erosion, salt, alkali. 



208 


ECONOMICS OF INDIA AND PAKISTAN 


(b) Crop production! especially the planning of cropping 
schemes, the balance between cash, food and fodder crops, the 
fusion of animal husbandry and agriculture, the improvement of 
grazing land, the taking of action on the results of marketing and 
other economic enquiries. 

(c) The exploitation of discoveries or processes of commercial 
importance. The Commission would not itself embark on indus- 
trial enterprises, but it would smooth the way for others to do 
so by helping to bridge the gap between the laboratoiy and the 
factory, and by giving information and advice to the commercial 
body undertaking the work. Seeing that some kind of monopoly 
would usually have to be granted for a term of years the 
Commission would advise the Government, on the technical 
side, as to the terms that could be accepted. 

(d) The multiplication and distribution of seeds of approved 
Varieties of crops and of named varieties of trees. 

(e) The improvement of village roads. 

8. Indian CounciTs work during 194J-44 : According to 
the latest annual Report of the I. C. A. R. the following lines of 
work was undertaken during the year 1943-44. 

(1) Village schemes to improve the economic and nutritional 
conditions of the villagers were started in some villages in 
Bombay, the United Provinces, the C. P. and Berar and Travan- 
core during the year. Each village was placed in charge of an 
agricultural Assistant who was to receive training in nutrition for 
about six weeks at the Nutritional Research Laboratories, 
Coonoor. Other features of the schemes were to help agricul- 
turists to increase acreage, yields and production, by adoption of 
all proved agricultural improvements and to develop marketing 
in the villages. 

(2) Successful experiments were made in mixed farming in 
the United Provinces, Central Provinces and Berar, N. W. F. P. 
and Sind. The results indicated increased income in cash and 
food crops in the mixed farming units, as compared with the 
control units. 

(3) Experiment in dry farming and conservation of moisture 
continued in Sind. The introduction of trees to provide shade 
and fodder for cattle was also included in the investigation. 

(4) A special grant of Rs. 1,07,000 was given by the Govern- 
ment of India for improvement of agricultural statistics. This 
was utilized by (i) initiating an enquiry into the existing system of 



THE STATE IN RELATION TO AGRICULTURE 209 


preparing agricultural statistics and crops forecasts in the Punjab 
and C, P. and Berar (u) for conducting crop costing experiment 
on the 1943-44 wheat crop in the U. P. and the Punjab. 

(5) A purple leaf variety of rice was discovered in the C. P. 
which can be easily distinguished from wild rice. This will 
enable the farmers to weed out wild rice and thus save Rs. 65 
lakhs per annum. In Assam an improved variety of paddy was 
distributed among farmers leading to a large increase in yield. 

(6) Experiments continued on developing rust resistant 
varieties of wheat. Research work on diseases and pests of 
various pulses and oil seeds also continued. 

(7) Centres of production of English vegetable seeds were set 
up in Kashmir and Baluchistan. 

(8) The Council received a grant of Rs, 2,25,000 for introduc- 
tion of the ‘‘ Bangalore ’’ process of converting town refuse into 
manure in all important Municipalities of the country. Fourteen 
officers from the provinces and the States were trained at the 
Indian Institute of Science. They have started work in various 
provinces and States. - 

(9) Attention was paid to increasing the supply of milk by 
assisting gowshallasy conserving cattle wealth of the country 
through prohibition of indiscriminate slaughter and maintaining 
animal health. 

(10) Schemes have been invited for reorganizing the Ghee 
industry. A scheme was sanctioned for manufacture and grading 
of yellow ghee. Prevention of ghee adulteration also received 
attention and counteracting measures were suggested to the 
various governments.^ 

9. The Achtevements of Research Activities : The Pro- 
vincial Agricultural Departments and the Indian Council have 
done useful work in connection with agricultural improvement. 
This work relates to introduction of better varieties of crops, 
improved methods of cultivation and manuring, better methods 
of harvesting and handling, measures taken to deal with locust 
operations in the production and use of protective sera am 
cattle improvement, encouragement of consolidation of holdings, 
improvements as regards soil management and the use of 
fertilizers, etc. 

The most important work, however, relates to the improved 
quality seed of the various crops. The latest available figures 
-show that area under improved varieties of crops in British India 

. 1. Indian Infomatioa ^ MarcL 1945, pp. 302-305. 



210 IGONQMICS OV.mDlA AND PAKISTAN 

Is about 23 million actes, THis is about 10 per cent of the total 
sown area. In the' Indian states this percentage is only 1*3, But 
the percentage varies considerably as regards individual crops as 
the following table shows : , 

■ percei4tage area under improved seed 


Crops 

... British India 

Indian States 

All India 

Rice 

5 3 

1*5 

5*1 

Cotton 

34*5 

5*0 

25*0 

Wheat 

24'9 

r3 

20 7 

Jute ^ 

62.5 

... 

62*5 

Sugarcane 

76 6 

7*2 

71*1 

Groundnuts 

3*4 

10*2 

5*0 


According to Sir Bryce Burt, ex-Vice Chairman, Indian 
'Council of Agricultural Research, the achievements in this 
connection during the decade following Agricultural Commission 
were^ ; — 

(0 The average yield of cotton in the quinquennium 1932-37 
was 108 lbs per acre as compstred with 96 and 95 in the two 
previous quinquennial periods. As for the change in quriity in 
the three years 1927-28 to 1931-32 short staple cotton, below 
i" formed 75 per cent of the whole and medium staple 25 per 
cent while 1938-39 the figures were : short staple 63 per cent, 
medium staple 32^ per cent and long staple 4| per cent. 

(if) In the case of Jute in 1937-38 the . areas under depart- 
mental varieties was 1,763,000 acres out of, a total of 2,889,000 
acres, * 

(Hi) The remarkable expansion of the groundnut crop has 
continued until India is the world’s largest producer and its 
second exporter, despite the enormous internal consumption. 
The crop has spread from 3,000 acres in 1900 to 9 million acres in 
1937-38, 

(iv) In, respect of sugarcane, about 80 per cent of the total 
area was brought under improved variety by 1939, and the 
^estimated production per acre expressed as gur increased from IT 
tons in 1927-28 to 1*4 tons in 1937-38. ' 

(v) As for rice in 1937-38, the area under improved varieties 
had reached 3,759,000 acres compared with 6M,000 acres in 
1927-28, 

(vi) Progress in wheat production can be seen from the fact 
that the total area under improved varieties just fell short of 7 


,1 Quoted by Nanavati and Anjaria ; Indian -Rural Problem, ppl 89z90> 



THE STATE IN RELATION TO AGRICULTURE 211 


million acres mark in 1937-38, this being nearly one-fifth of the 
total area* 

(mi) The tobacco industry, which was in its infancy in 1929, 
now employs about 52,03 flue-curing barns. Some 85 per cent of 
the total requirements of the Indian cigarette factories were 
provided by Indian grown leaf in 1938 and an important export 
trade had been developed. 

.These are impressive achievements, but in, view of the 
immense possibilities, they only touch the fringe of the problem* 
As we have seen only one-tenth of the cultured area is under 
improved varieties. India spends only ll% per head of popula- 
tion on agriculture. This comes to less than Rs. 70 per 1,000 of 
population. No wonder the pace of development has been slow^ 
Some writers regard this as inevitable under the circumstances. 
“ Having regard to the small holdings, to the poverty, to the 
ignorance of the Indian peasant and the variability of the seasons 
in India, it is not possible to achieve large results quickly.^ The 
basic conditions of agriculture thus require a fundamental change. 

Indian agriculture ” according to Brij Narain, “ needs a 
fundamental reorganization. Our experience during the world 
crisis suggests that the problem of Indian agriculture is too 
difficult to be solved by agricultural research and improvement. 
No real progress is possible without radical changes in the system 
of landholding and the methods of cultivation. Further, Indian 
agriculture cannot be modernized unless means are found to 
divert surplus labour in the villages to manufacturing indus^ 
tries.’ We fully subscribe to this view. 


L Gadgil : Industrial Evolution in India, f). Hu 
6rij Narain 1 India Before the Crisis, p; 41 li 



CHAPTER X 


PAMINE AND FAMINE RELIEF POLICY 

Introduction ; Until the resent calamity that involved 
Bengal, it was a common saying that since the beginning of the 
present century famines in India “ are no longer food famines, but 
are only money famines/’ This meant that provided money was 
put into the hands of the people by giving them employment or 
charity there was no fear of starvation* This was so because food 
could be transported to areas of scarcity from the four corners, 
not only of India but also of the world. This result had been 
achieved by the revolution in transport that occurred during the 
2nd half of the 19th century, by the increase in the production 
of foodgrains made possible by the construction of artificial irriga- 
tional works and the policy of famine relief evolved by the Gov- 
ernment during the same period. In normal times this would be 
true even now. The Bengal famine was due to certain special 
circumstances created by the war, and these circumstances will 
not be there when the normal conditions have been re-established. 
In normal times the famine relief policy of the Government 
should operate effectively enough to prevent loss of human life 
through starvation. Let us trace the evolution of this policy by 
a rapid glance over the history of famines in India. 

2. History of Famines ; Famines have been known to 
India from times immemorial. During the Hindu period famines 
must have occurred though records are not available to give us 
any details about them. On such occasions, according to Chanakya, 
the state helped the people by remission of taxes, encouragement 
of emigration, granting relief in money and grain and by construc- 
tion of artificial irrigational works. 

During the Muslim period several famines visited the country, 
four of them being very severe. The first was in 1343, during the 
reign of Mohammad Tughlak, The king ‘‘ ordered provisions for 
six months to be distributed to all the population of Delhi.” 
During the reign of Akbar there was fearful famine which raged 
all over the country for three or four years. Alms were widely 
distributed under the orders of the Emperor to give relief. Under 
Shah Jehan, one of the greatest famines ever recorded in history 
visited India, and vigorous measures of relief were adopted. 



FAMINE AND FAMINE RELIEF POLICY 


213 


Another famine followed during the times of Aurangzeb. The 
Emperor granted relief through the remission of the land revenue ; 
and in the words of lames Mill, ‘‘ The Treasury of the Emperor 
was opened without limit, corn was bought in the provinces 
where the produce was best conveyed to those in which it was 
most defective and distributed to the people at reduced prices.” 

During the rule of the East India Company (17604857) there 
were twelve famines and four severe scarcities. The most impor- 
tant famines occurred in 1770, 1784, 1802, 1824 and 1837. During 
this period the condition of the country was unsettled. Matters 
like wars, disorder, new judicial and revenue systems, administra- 
tive corruption and unemployment caused by demobilization of 
troops, engaged the attention of the rulers and the people. On 
the whole the attitude of the Company was determined by com- 
mercial considerations. In later years slipshod methods of famine 
relief were adopted. Among these were regulation of prices, 
encouragement of emigration and occasionally construction of 
public works. 

In 1858 India passed under the rule of the Crown. Between 
that date and the end of the century there were several famines, 
and it was during this period that the policy of famine relief was 
evolved and perfected. The chief famines cf this period were : — 

Year. Areas chiefly affected. 

(1) 1860 —North-West India. 

(2) 1865 —Orissa. 

(3) 1868 — Rajputana. 

(4) 1878 —Bihar. 

(5) 1876-78— ^uth India. 

(6) 1896-97 — Bombay, Madras, Central Provinces. 

(7) 1899-1900 — Bombay, C.P. Berar, Nizam's Dominions 
and Central India. 

3. Evolution of Famine Relief Policy : From the point of 
view of the famine relief policy the famines of 1865, 1876-78, 
1896-97, and 1899-1900 were the most important. 

The Orissa famine of 1865 affected five crores of people. 
Mortality was about 10 lakhs of lives. Action on the part of the 
Government was slow in the beginning, but later large quantities 
cf food were supplied. This famine induced the first great and 
organized effort to combat distress through state agency.”^ Thirty- 
five million units were relieved (a unit being one person supported 
for one day) at a cost of Rs. 95 lakhs. 


1. Indian Year.-Book, 1941-42, p. 373. 



214 


r ECONOMICS OF -INDIA AND PAKISTAN 


'The Great South Indian Famine of 1876-78, caused a mortality of 
52 lakhs, and affected Madras, Mysore, -Hyderabad and Bombay 
and later also extended to parts of Central and United Provinces 
and the Punjab. It afFected SSi'million people* Seven hundred 
crores of uiiits were relieved throughout British Itidia at a cost of 
Rs. 8J crores. “ Warned by excessive expenditure in Bihar 
and actuated by the desire to secure economy the Gov-ernment 
relief programme was not entirely successful.”^ The experiences of 
this famine brought home to the Government the necessity of 
placing ; relief on an organized basis. It was after this famine that 
the first Great Famine Commission was appointed under the 
chairmanship of Sir Richard St,rachey. The recommendations of 
this commission formed the foundations on which the famine 
relief policy was laVr on based. The principles of famine relief, 
or, famine codes, as they were laid down by the Commission 
were : — , 

(1) that employhient should be given on the relief work to 

the able-bodied at a wage sufficient for support, on the 
condition of performing a suitable task ; 

(2) that gratuitous relief should be given in their villages or 

in poor houses to those who are unable to work ,; 

(3) the food supply should be left to private agency, except 

where that was unequal to the demands upon it ; 

(4) the land-owning classes should be assisted by loans and 

by general suspensions of revenue in proportion to the 
crop failure. 

On these principles provincial codes were drawn up and were 
tested by the famines of 1896-97 and 1899-1900 and were amended 
according to experience. , 

In the meantime in 1878, the Government had instituted a 
Famihe Thsurahee Grant of Rs. Ti crores. a year to be provided in 
the Annual budget. “The first charge on this grant was famine 
relief, the second 'protective works, the tfhird the avoidance of 

‘ The Faming of 1896-97, spread almost all over India, except 
Ibwef Burma and extreme south of the Peninsula. Sixty-nine and 
a half ! millions of p^ were affected. At * the time of the 
greatest ' distress ^4 >000, 000 persons were relieved. The total 
ebstdf f^niine relief wks 7| crores; revenue was remitted to 


1. Ibid. 

2. Ibid, p. 375. 



FAMINE AND FAMINE RELIEF POLICY 


215 


the extent of Rs. 1 | crores; and loans were given to the amount 
of Rs. I 4 crores. The estimated mortality in British India was 7| 
lakhs of persons. The success attained in' relief was greatest so 
far. The Famine Commission under Sir Jj^mes Lyall that reviewed 
the position after this famine, recoinmended relief for special 
classes like weavers apd hill tribes ; they laid down rules for 
managing charitable funds, advocated free grant of gratuitous 
relief. They favoured the extension of decentralized relief works. 
Before the people could recover from this famine the next famine 
came in 1899. 

The Famine of 1899-1901 was very severe though it was not 
so widespread. The policy of relief was more generous so that 
Rs. 15 crores were spent. A special feature of this famine was 
cattle mortality! The total population affected was 59j millions. 
By the end of July 4i million persons were supported by the 
State. Although actual deaths from starvation were insignificant, 
epidemics of malaria and cholera brought up mortality figures to 
about a million souls. The Indian States also accepted the 
responsibility of saving life during this famine, and did a great 
deal to bring their administration of relief to the British Indian 
standard. In 1900 the Maharaja of Jaipur donated Rs. 15 lakhs 
which formed the nucleus of the Indian People’s Famine Trust. 

In 1901 reported another Finance Commission under Sir 
Anthony MacDonelL The Commission emphasized the import- 
ance of “moral strategy” or putting heart into the people. 
They recommended : assistance by takkavi loans as soon as the 
danger was scented ; early suspension of land revenue, a policy of 
prudent boldness involving preparations for a large and elastic 
plan of relief, constant vigilance and full enlistment of non-official 
help. ' Tbey also emphasized the necessity of tackling the fodder 
problem and thus saving the cattle. Further,* they recommend- 
ed tatting of co-operative societies and extension of State irriga- 
tion in the form of protective works. 

The amended famine codes embodying these principles stood 
the test of subsequent famines in U. P., (1907) ; Ahmadnagar 
(1912) and widespread scarcities of 1918 and 1920, 

' Side by side with the development of the famine relief policy 
the State has taken measures for -protection against famines. 
Out of the Famine Insurance Grant, already spoken of, protective 
railways and protective irrigation works have been constructed. 
‘ The latter have been constructed as. recommended by- the Irriga- 
tion Commission (1903) in the most famine^susceptible districts 
of India in the Bombay Deccan and in the Central Provinces* 



216 


ECONOMICS OF INDIA AND PAKISTAN 


Apart from these the resistance power of the people has 
increased due to various causes like greater industrial develop- 
ment, improved rural credit, better means of transport and the 
various activities of the Departments of Agriculture, which have 
helped to increase the productivity of the land. 

4« The Famine Relief Fund : Under the Act of 1919 the 
Provincial Governments were required to Institute a Famine 
Relief Fund by annual assignments from their revenues. This 
Fund was invested with the Central Government which paid 
interest on it. It was available for expenditure on famine relief 
under specified conditions. Under the Act of 1935 there is no 
provision for a separate Famine Relief Fund. Some Provincial 
Governments, however, have instituted new Famine Relief Funds 
which are invested in securities of the Central Government. 
To this end Acts have been passed by Provincial Legislatures in 
Madras, Bombay, Bengal, United Provinces, Bihar, Central Prov- 
inces and Berar, North-West Frontier Provinces, Orissa and 
Sind. The Punjab Government have decided to continue the 
Famine Relief Fund but have considered it unnecessary to have 
an Act of the Legislature to constitute the new Fund/’^ Assam 
has no Famine Relief Fund. 

In the meantime ‘‘ the Indian People^s Famine Trust which 
as we have seen was established in 1900, when the Maharaja of 
Jaipur gave a sum of Rs. 15 lakhs, increased in volume. Within 
a few years due to private philanthropy it stood at Rs. 28 lakhs. 
During 1934, it increased further when the invested balances of 
the United Provinces Famine Orphans’ Fund l^ere transferred to 
it. At present it stands at Rs, 32.9 lakhs. This fund is adminis- 
tered by a board of management consisting of 13 members appoint- 
ed from different provinces and States. The income from the 
investment of this fund is utilized for relief work whenever 
necessary. In recent years, due to the change in the character of 
the famines, the fund has been used to relieve distress due not 
only to failure of rains but also to floods and earthquakes. The 
Trust, however, only supplements the expenditure in relief under- 
taken by the Government. 

5, The Present Relief System ; A few words may now be 

said about the system of famine relief that exists at present. A 
complete machinery exists now in the hands of the Government 
to tackle the famine when it arrives. Steps are taken not only 
* When the famine has actually arrived but preparations are made 
Tn anticipation: {a) ‘Mn ordinary times Government . is kept 

1. Indian Year Book, 1943-44, p. 327. 



FAMINE AND FAMINE RELIEF POLICY 


217 


informed of the meterological conditions and the state of the 
crops ; programme of suitable relief works are kept up to date, the 
country is mapped into relief circles, reserves of tools and plants 
are stocked/’ (b) “ If the rains fail, policy is at once declared, 
non-officials are enlisted, revenue suspended and loans for agricul- 
tural purposes made. Test works are then opened, and if labour 
in considerable quantities is attracted, they are converted into 
works on code principles. Poor-houses are opened and gratuitous 
relief given to the infirm.” (c) “ On the advent of the rains the 
people are moved from the large works to small works near their 
villages, liberal advances are made to agriculturists for the pur- 
chase of plough, cattle and seed.” (d) “ When the principal 
autumn crop is ripe, the few remaining works are gradually closed 
and gratuitous relief ceases, (e) “ All this time the medical staff 
is kept in readiness to deal with cholera, which so often accompa- 
nies famine and malaria, which generally supervene when the 
rains break.”^ 

Up to the recent Bengal famine this system worked quite 
satisfactorily. “ Famine in the old terrible sense of the word,” 
we were told, ‘‘ ceased to occur.” This was due to the, possibility 
of moving food from surplus areas to deficit areas on account of 
the development in the means of communications and transport 
and the relief machinery of the Government described above. 
But this system of relief failed in 1943, especially in the case of 
Bengal. 

6. Causes of the Bengal Famhie of 1943-44 ; Although the 
food situation could not be regarded normal during the first two 
years of the War, since food prices were rising, the difficulties in 
their acute form dated from the entry of Japan into the war in 
December, 1941. The worst sufferer in the scarcity that followed 
especially after the end of 1942 was the Province of Bengal 
Apart from this province acute food scarcity was experienced in 
Madras, Bombay, and the States of Travancore and Cochin. " In 
Bengal, according to the Famine Commission, H million^ persons 
died due to the famine and the epidemic that followed in its 
wake. 

According to the Bengal Famine Enquiry Commission^ the 
causes of the tragedy’ were as follows ; — 

1. During 1943, there was a serious shortage in the total 
supply of rice available for consumption in Bengal as compared 
with total supply normally available. This was due to — 

1 Indian Year Book, 1943-44, pp. 326-27. 

2. Famine Enquiry Commission, Report on Bengal, p, 1 10, 

3. Ibid, op cit. p. 77, 



218 ECONOMICS' OF INDIA AND PAKISTAN 


(a) a shortage*; in the yield of winter rice crop (aman^) of 
1942 combined with 

(b) a shortage in the stock of old rice carried forward from 
1942 to 1943, 

IL Of the total supply available for consumption, the 
proportionate requirements of large section of the population 
who normally buy their supplies from the market, either all the 
year round or a part of the year, were not distributed to them at 
a price which they could afford to pay. This was due to : 

(a) the incapacity of the trade operating freely in response to 
supply and demand to effect such a distribution in the conditions 
prevailing ; and 

(b) the absence of that measure of control, by the Bengal 
Government, over producers, traders and consumers in Bengal, 
necessary for insuring sutch a distribution. 

Ilk The supply, of rice and wheat which under normal 
conditions would have been available to Bengal frbm sources 
external to the province, was not available during the closing 
months of 1942 and large part of 1943, This was due to : 

(a) the loss of imports of rice from Burma, and 

(b) the delay in the establishment of a system of planned 
movement of supplies from surplus provinces and states to deficit 
provinces and states. 

Thus according to the Commission the famine was due to (i) 
shortage of supply, (it) breakdown of normal , machinery of 
distribution (Hi) incapacity of the authorities to meet the situation, 
A few words on each of these causes would be instructive. 

7 Shortage of Supply of Rice in 1943 : This was due to the 

low yield of the aman (winter crop) reaped at the close of 1942, 
There was little carry-over from the previous year. The aman 
crop for 1940 was exceptionally poor. Stocks were heavily drawn 
upon in 1941, The aman crop of 1941 was good but not good 
enough to replenish stocks materially. In fact M, Afzal Hussain 
in his Minute contends that there could not have been any stock 
to carry over during the year in question, “ Bengal had no 
carry-over of rice worth considering in the beginning of 1943,’* ^ 

Early in 1942 Burma fell and imports from that country 
(about two million tons a year on the average) ceased. Exports 


1, Aman crop is the main crop of Bengal rice. 

2. Report, op, cit„ p. 187. 



219 


FAMINE AND FAMINE' RELIEF POLICY 

from Bengal to areas, which more seriously depended upon 
Burma rice, increased during the first half of 1942. In 1943 loss 
of imports from Burma was only partially off-set by imports from 
other parts of India. ‘‘ It appears probable,” says the Commission, 
“ that total supply during 1943 was not sufficient for the province 
and that there was an absolute deficiency of three weeks’ require- 
ments. This meant that even if all producers sold their entire 
surplus stocks without retaining the usual reserve for consumption 
beyond the next harvest, it was unlikely that consumers would 
have secured their normal requirements in full.^ ” 

8. Failure of Distribution Machinery. In the summer of 
194'2 situation arose in rice markets of India, including Bengal, 
when normal trade machinery was beginning to fail to distribute 
supplies at reasonable prices. This was caused by stoppage of 
imports from Burma, which transferred demand of areas depend- 
ing on Burma rice (Ceylon, Travancore, Cochin, Western India) 
to markets in the main rice-producing areas of India. Other 
wartime circumstances accentuated the distress thus created. 
Bengal being near the military operations and base for fighting 
in Burma, suffered most from material and psychological reper- 
cussions. Shortage of supply and absence of control were bound 
to raise the price of rice to a level at which the poor were unable 
to obtain their needs. 

9, The Responsibility of the Bengal Government. At this 
time the .Bengal Government should have taken measures to 
control supplies and ensure their proper distribution at controlled 
prices. The Provincial Government failed to do so. The Com- 
mission attributes this failure to political causes. “ Between the 
Government in office and the various political parties, and in the 
early part of the year (1943) between the Governor and his 
Ministry, and between his administrative organisation of Govern- 
ment and the public, there was lack of co-operation, which stood 
in the way of a united and vigorous effort to prevent and relieve 
famine.” ^ 

The main errors committed by the Bengal Government ^ 
according to the Commission were : (/) Failure to set up proper 
procurement organisation to obtain control over supplies. For 
this reason price control measures taken in June 1942 did not 
succeed. 0*0 In January and February 1943, the Government 
to' obtain control of supplies through unofficial agencies. This 
was a mistake. Official agency would have been more reliable. 


1. Ibid p. 103. 

2. Ibid p. 105. 

3. Report, p. 104. 



220 ECONOMICS OF INDIA AND PAKISTAN 

(iiO In March 1943 decision was made in favour of decontrol ”, 
which was again a mistake. Control was essential under the 
circumstances, {iv) In May 1943 the Government of Bengal pressed 
strongly for ‘‘ unrestricted free trade ” ^ in Eastern Regions in 
preference to modified free trade.” This measure could not 
save Bengal but “ led to severe distress and possibly starvation 
in the neighbouring areas of the region.” ^ The result of 
‘‘decontrol” and “ unrestricted free trade” was that greater 
supplies reaching Calcutta were not under the control of Govern- 
ment and hence rationing could not be introduced in Greater 
Calcutta. Even when the policy was reversed there was consider- 
able delay in introducing rationing, (v) Arrangements for receipt, 
storage and distribution of food supplies from other parts of 
India during the autumn of 1943 were thoroughly inadequate. 
The proportion of the supplies received during the height of the 
famine was not distributed to the needy in the districts where 
such food was mostly required* “ Better arrangements for despatch 
and distribution would have saved many lives ”. (vi) No timely 
action was taken on the official reports of distress received from 
the countryside and in many cases relief was limited on financial 
grounds. 

These are extremely serious charges by a body who Ihust 
speak with authority. It is thus that the Bengal famine was called 
a “ man-made famine,” 

10. The Responsibility of the Government of India ; The 

Government of India also cannot escape responsibility. They 
should have established a system of planned movement of supplies 
from surplus to deficit provinces early enough. Steps in this 
connection were taken with considerable delay. It appears the 
Government of India was respecting the autonomy of the pro- 
vinces during an emergency in which such niceties of behaviour 
were out of place. 

The main errors of the Government of India according to 
the Commission were (/) They failed to recognize early enough 
the need for planned movement of wheat and rice from surplus 
to deficit areas. The Basic plan should have come earlier than it 
actually did in the closing months of 1942* (ii) The Government 
of India must share with the Bengal Government in the decision 
of decontrol made in March 1943. {iii) They should have 
announced that they could provide month by month full quantity 
of wheat required by Greater Calcutta and a certain quantity of 

h See footnote on next page for explanation of these terms. 

2. Report, p. iC6. 



FAMINE AND FAMINE RELIEF POLICY 


221 


rice, (iv) They erred in deciding to introduce “ unrestricted free 
trade ’’ in Eastern Regions in 1943 in preference to modified free 
tradeh^* 

11. The Responsibility of the People : According to the 
Commission the atmosphere of fear and greed in the absence of 
control was one of the causes of rise in prices. Enormous 
profits were made out of the calamity, and in the circumstances 
profits for some meant death for others/’^ It has been reckoned 
that the amount of unusual profits made on the buying and sell- 
ing of rice daring 1943 was 150 crores.”^ A large part of the 
community lived in plenty while others starved, and there was 
much indifference in the face of suffering, corruption was wide- 
spread throughout the province and in many classes of society/** 
At another place they say, “ Men, women and children died as 
much because they could not pay for the food they needed as 
because food was not available/’*^ 

12. Steps taken by Government of India : To meet the 
food situation in the country the Government of India took certain 
steps which may be noted. 

(a) To deal with the control of food prices, supply and distri- 
bution of food-stuffs and to co-ordinate civil and military pur- 
chases, a Food Department was set up on 2nd December, 1942. 
From January, 194X this Department took over from the Supply 
Department the task of procuring and purchasing the food require- 
ments of the Army. 

(b) A Central Food Advisory Council consisting of officials 
arid non-officials was established in July, 1942, to pursue the task 
of food production on an all-India basis. The task was also 
attached to the Food Department. Thus was started the ‘ Grow- 
More-Food campaign.* 


1. These were the’ alternatives cf policy considered in April 1943 at a 
meeting between the representatives of Government of India and Government 
of Bengal Both proposals involved withdrawal of powers from the Provincial 
Government, bat “ modified free trade ” involved the retention of power of 
control and their exercise by the single authority, the Regional Food Commis- 
sioner, Inter-provincial exports were to be controlled by a system of licences to 
private traders issued by the importing government* This gave the Bengal 
Government some power of control over food supplies* But the Provincial 
Government preferred to maintain unrestricted free trade, thinking that this 
would le d toil ow of supplies into Bengal and ease the situation* This did not 
happen. 

2. Ibid p. 107. 

3. Ibid p. 80. 

4. Ibid p. 107. 

5. Ibid p. 7^*' 



222 


ECONOMICS bp INDIA AND PAKISTAN 


(c) The Food Department adopted tlie Basic Plan for one year 
ending November, 1943, with' respect to the major fobdgrains. 
The idea was to facilitate the procurement, transport and distri- 
bution of foodgrains from the surplus provinces for the benefit of 
the deficit provinces. For this purpose regional Commissioners 
were appointed to maintain liaison between the provincial or 
State administrations and the centre and to ensure that the food 
plan was implemented. 

The Basic Plan achieved the distribution of 1,240,000 tons of 
foodgrains in 7^ months. From 18th August, 1943 a revised Basic 
Plan came into operation. The aim of this plan was to distribute 
1,400,000 tons of foodgrains from surplus to deficit areas from 
August, 1943 to March, 1944. 

(d) In addition price control of certain food products and 
rationing was instituted in certain urban centres which met with 
varying success. 

(e) In July, 1943, a Foodgrain Policy Committee was appointed 
with the following terms of reference : 

To examine the past policy and present position in Indiadn 
relation to the supply, distribution and price of foodgrains, in the 
light of the relevant conditions, including those imposed or liable’ 
to be imposed by the' war, and to make recommendations, both ; 
of policy and for administration, for securing for the duration of 
the war, maximum supply, equitable distribution and' proper 
control of prices in relation to foodgrains.’’ 

13^ Recommendations of the Food Policy Committee ; 

Among the important recommendations of the Committee were — * 

(a) The ‘ Grow-More-Food campaign’ should be encouraged 

by the Government by large-scale distribution- of improved seed, 
production and supply of better manures (compqsts from night- 
soil, assisting the manufacture of Ammonium Sulphate), promo- 
tion of irrigation and drainage schemes, prevention of depletion 
of India’s milch and draught cattle, importation of tractors and 
other agricultural implements, securing fuel and lubricating oil 
required by agriculturists, regulation of crop production, compell- 
ing the cultivation of culturable waste, increasing the strength of 
provincial Departments of Agriculture and promoting schemes of 
research especially those bearing upon the immediate shortage of 
food production. ' ' 

(b) India must cease for the duration of the war to be a net 
exporter of food. No export of rice should be permitted at all. 



,FAMINB,AND FAMINE RELIEF POLICY 


223 


(c) ' The Government of India should (/) press for imports to 
create .a Central Food grains Reserve which should not be less 
than 500,000 tons. This will help the Government in enforcing 
price policies, (n) press the United Nations to, arrange for 
imports for current consumption to make up for the loss in net 
imports." The amount imported for this purpose was to be 
1,000,000 tons of foodgrains a year. 

(d) Procurement machinery should be set up in the various 
areas to procure foodgrains on behalf of the Government. The 
work should be entrusted to the agencies set up by the provinces 
and the states and competitive buying should be eliminated as 
far as possible. Requisitioning from the cultivator should be 
resorted to with extreme caution. Consumers’ goods should be 
made available to the cultivators in exchange for foodgrains 
preferably through co-operative societies. Gold and silver may 
also be provided for the cultivator if necessary. 

(e) As regards movement of food, an ofHcer-in- charge of 
movement is required in the Food Department. Complete control 
of, and co-ordination over, coastal shipping should be secured, 
priority of movement of food should be secured by proper 
organization of country craft, river and canal transports should be 
organized for the movement of foodgrains and more use should 
be made of road transport. 

(/) Rationing should be introduced forthwith in the larger 
cities of India, both in the deficit and surplus areas, in the first 
instance in those with populations of one lakh and over and 
should’ be progressively extended. Rationing should extend to 
all classes and sections of population and should cover all major 
foodgrains of the area under consideration, anti-hoarding mea- 
sures should be drastically enforced,- 

(g) The disparities of food prices in different areas should be 
narrowed down by reducing prices where they are too high. This 
should be done by importation of maximum quantities of food 
products from surplus areas and overseas into deficit areas. 

14. Government Action on F. G. P. Committee Report : 

The recommendations of the Committee were accepted by the 
Government and their policy was moulded accordingly. In a 
conference convened at Delhi in the middle of October 1943, 
the Food Member announced three lines of policy : — 

(0 Banning of all exports of food. 

0*0 Taking steps for the import of foodgrains. 

iiii) Appointment of a Central Advisory Committee. 



224 


ECONOMICS OF INDIA AND PAKISTAN 


At the conclusion of the Conference the Central Govern^ 
ment announced its decision in favour of (a) the basic plan of 
procurement, (b) Statutory price control of major foodgrains and 
(c) urban rationing. 

The policies were implemented by practical steps. Export of 
foodgrains was prohibited. Arrangements were made for imports, 
though during the 12 months following the Report of the F. G. P. 
Committee, only 800,000 tons could be imported instead of 
1,500,000 recommended by the Committee. This deficiency was 
attributed to the difficulties of getting shipping space in view of 
other pressing needs of the war. To facilitate procurements the 
Foodgrains Control Order, of May 1942, was rigidly enforced. 
This order required dealers in foodgrains to take licences and 
submit monthly returns of their stocks. No one could hold 
more than 40 maunds of foodgrains at a time. A Price Advisory 
Panel was established. Statutory prices on AlUndia basis were 
fixed for Wheat, Bajra and Jowar. Since it was thought unfair 
to curb foodgrain prices while leaving other commodities im-r 
controlled, on 16th October, 1943 by an Ordinance, profiteering 
in all commodities, except those already under control, was 
prohibited. Urban rationing was introduced, so that by the end 
of October 1944, 420 cities with a total population of 42,000,000 
had been rationed. Finally the Grow^More-Food campaign was 
intensified to increase production. 

15. The Grow.^More.Food Campaign: In April 1942 the 
Government of India called a Food Production Conference,’’ 
which was attended by representatives of provinces and states. 
The object was to propose measures for the increased production 
of foodgrains in India, particularly to meet the situation arising 
out of the loss of imports of rice from Burma. 

The measures recommended by the Conference, which were 
to constitute the Grow-More-Food campaign were as. follows : — 

(f) An increase in the area under food and fodder crops 
by 

(a) bringing new land including fallow land, under culti- 
vation ; 

(b) double cropping ; and 

(c) diverting land from non-food crops to food crops. 

(ii) An increase in the supply of water for irrigation by the 
improvement and extension of existing irrigation canals, 
the construction of additional wells, etc. 



FAMINE AND FAMINE RELIEF POLICY ^ 225 

(Hi) The extended use of manures and fertilizers. 

(iv) An increase in the supply of improved seeds. 

The campaign has been conducted on these lines by the 
Central, Provincial and State Administrations. The Central 
Government has helped mainly by making grants and giving 
loans. The grants have been partly from the Central Revenues 
and partly from a fund called the Cotton Fund, created in 1942 
out of the proceeds of an additional customs duty on the imports 
of raw cotton. ‘‘The object of this fund was to enable Govern- 
ment to take steps for the relief of the situation arising out of 
the stoppage of cotton exports to Japan by, inter alia, financing 
measures designed to assist the cultivator to change over from 
short-staple cotton to other crops.’’ ^ 

The total loans and grants made by the Central Government 
in two years ending 1944-45 were as follows : — 

Rs Lakhs 



1943^44 

1944-45 

Total 

Loans : — 

164*4 

129*1 

293*5 

Grants ) Central revenues 

69.8 

162*0 

231*8 

from ) Cotton Fund 

14-8 

23.3 

38*1 


Expenditure of about equal dimensions was also incurred by 
the Provincial and the State Governments from their own 
resources. Grants were generally made on a 50-50 basis. 

16, Actual Work and Achievements : We may briefly 
review the actual work done under this campaign, following the 
lines laid down by the Food Production Conference. 

(/) Increase in area under food and fodder crops. This was 
to be achieved by bringing new land under cultivation, including 
fallow land, double cropping, and diverting land from non-food 
crops ro food crops. We have already examined the reasons why 
culturable waste is not cultivated. Only very expensive measures 
can help in this connection. Various measures, however, were 
taken to encourage the bringing of new land under the plough. 
Such were interest-free loans, rent-free leases for a term of years, 
rebate on assessment of land revenue, the supply of water for 
irrigation free or at concessional rates, the supply of seed at 
cheap rates, and the amendment of tenancy laws etc. Some 
tallow land was also brought under cultivation mainly due to 
high prices. Double-cropping land was extended considerably 
G’5 million acres more in 1943-44 compared with the average of 
six years ending 1941*'42). As regards diversion from non-food 

1. The Famine Enquiry Commission ^Final Report), p. 13. 



226 


ECONOMICS OF INDIA AND PAKISTAN 


to food crops area under cotton was reduced from 24*2 million 
acres in 1941-42 to 19*2 million in 1942-43. In its place mainly 
jowar and bajra were grown. But the reduction of cotton 
reduced the supply of cattle food represented by about 500,000 
tons of cotton seed. Similarly area under jute was reduced by 
about a million acres between 1942-43 and 1944-45 and rice was 
grown ihstead. This also was mainly due to high price of rice. 

The table below gives changes brought about in area under 
the various crops mainly by the Grow-More-Food Campaign. 

AREA IN MILLION ACRES. 


Crops 

3 years* 
average 

ending 1938-39 

3 years* 
average 

ending 1941-42 

1942-43 

1943-44 

Rice (All India 



51*9 

53*4 

excluding Bengal) 

... 

... 

23*3 

... 

Bengal. 

... 

... 

24*6 

Wheat 

34 8 

34*3 

34*4 

33*7 

Barley 

6-3 

6*3 

6*8 

6*7 

Jowar 

34*8 

33*7 

35*9 

36*0 

Bajra 

16-9 

17*9 

22'2 

21*1 

Maize 

6*3 

6*3 

6*9 

6*9 

Ragi 

5.4 

5*4 

5*5 

5-4 

Gram 

14-9 

13-5 

15.7 

15*2 


Apart from rice, it will be seen that only in the cases of 
inferior grains like jowar and bajra appreciable increases have 
taken place in the area under them. These were brought about 
by reduction in the area under cotton. Increase in the area 
under rice is partly attributable to its reduction under jute. 
Exclusive of Bengal (the figures for which are not comparable 
with previous years) “ the area under rice in India in 1943-44 
was one million acres greater than any year during the previous 
ten years.” ^ 

_ (a) The second set of measures aimed at increasing the yield. 
This was to be done by increase in the supply of water for 
irrigation, extended use of manures and fertilizers and increase 
in the supply of improved seed. 

The irrigation schemes put forward under the Grow-More- 
Food Campaign consisted of ; {a) reconditioning of old and the 
construction of new tanks and open wells, (b) the construction 
of tube- wells fitted with power-driven pumps, (c) the erection of 
Pumping plant for the raising of water from rivers and minor 
extensions and improvements to existing canals. 


1. Famine Commission Report, op. cit., p. 22. 



FAMINE AND FAMINE RELIEF POLICY 


227 


Crores worth of rupees have been sanctioned for such 
schemes but “ the additional area brought under irrigation has 
not yet been large/’ ^ The Famine Commission attributes this to 
several causes : ‘‘ Departments are short-handed, materials are 
difficult to obtain, skilled labour is in short supply and above all 
delay is inevitable in obtaining machinery/’^ Greatest progress 
has been shown by the Punjab where 300,000 to 400,000 addition- 
al acres have been brought under irrigation since 1942-43* 

As regards manures little success has been achieved under 
the campaign in this connection. Due to pressure on land green 
manuring has made little progress ; bone meal manure is usually 
of small amounts. There are possibilities of preparing compost 
from town refuse and night-soil. Arrangements were made to 
train staff for this purpose. Production was started and by the 
end of December 1944, 130,000 tons of such manure had been 
prepared. Sales are being subsidized by the Government, Oil- 
cakes could be a source of manure but it is also a valuable cattle 
feed. As regards chemical fertilizers India imported 100,000 tons 
of them in 1939. The imports stopped during the war. By the 
beginning of 1944 only 20,000 tons produced in India were 
available. The Government succeeded in getting imports of 
76,000 tons and 34,000 tons during 1944 and early part of 1945. 
“The restrictions on the supplies of artificial fertilizers has 
undoubtedly been a great handicap to the Grow-More-Food 
campaign.”^ 

Improved seed also has been distributed* The principal 
agencies for multiplication of improved seed are the Provincial 
Agricultural Departments and registered growers under their 
supervision. Extension of improved seed takes time. Even then 
“ it has been possible to produce and distribute an additional 
quantity sufficient to cover an area of about 4 million acres.’^ 

Efforts have also been made to increase the supply of better 
vegetable seeds which before the war were imported from 
European countries. A seed farm has been established^an Balu- 
chistan and arrangements made in Kashmir for the acclimatiza- 
tion of vegetables of European type and for the production of 
seed on a large scale. Steps were also taken for the preservation 
of cattle and importation of improved implements. Restrictions 
were placed on the slaughter of cattle by the military* There 
was shortage of supply of iron and steel for replacing and making 
agricultural implements. According to the Government of India 

1, Ibid. p. 15. 2. Ibid p. 16. 

3. Ibid. p. U. 4. ibid. 



228 


ECONOMICS OF INDIA AND PAKISTAN 


a mmim-um of 25,000 tons of iron and steel per, quarter are 
required for this purpose* It was not possible to secure this 
amount* As regards more improved implements it was estimated 
that for 1944, 151 tractors were required. Out of these only 19 
tractors were received. 


Now as regards the increase in the yield of the various crops 
brought about by all these efforts the table given below is 
.significant ; — 

YIELD IN MILLION TONS 



Crops. 

3 years’ average 
ending 1938-39. 

Rice 

(All India 
excluding 



^ Bengal) ... 

... 


Bengal ... 

... 

Wheat 

10-2 

Barley 

... 

2*1 

]owar 

... 

6-8 

Bajra 

... 

2‘6 

Maize 


2-0 

Ragi 


1*7 

Gram 


3-5 


3 years’ average 1942-43. 1943-44, 

ending 1941'42. 


... 

17*9 

18*8 

... 

7*0 

10 3 

103 

11*0 

9-7 

2*1 

2*2 

2*2 

6*8 

6*7 

6*7 

2*9 

4*0 

3-7 

2*1 

2*4 

2*4 

1*8 

1*8 

1.8 

3*3 

4*1 

3.3 


Apart from bajra and rice no significant increase in yield is 
indicated by the above table. 1943-44 rice crop was exceptionally 
good. There was a record yield. The highest yield recorded for 
all-India excluding Bengal, during the previous ten years, was 
18'4 million tons in 1936-37. Compared with this the yield in 
1943-44 was higher by 400,000. But the yield of rice fluctuates' 
over a wide range. 

17. Conclusion regarding the Grow.More.Food Campaign : 

The Grow-More-Food Campaign mostly concentrated in increas- 
ing the production of cereals. Every possible measure was 
adopted : propaganda, extension of cultivation, double-cropping, 
diversion of land from non-food crops to cereal crops, increased 
irrigation, conservation and development of manurial resources, 
subsidized manure supplies and distribution of improved seeds, 
legislation concessions,, compensations, rewards and financial 
assistance to the cultivator. The war-time high prices provided 
an additional stimulous. But the net result of these efforts have 
not been spectacular, as the Famine Commission puts it. The 
total production of the main cereals increased only by three 
million tons if we compare the average for the year 1942*43 and 
1943-44 with the average of six years ending 1941-42. Even this 



FAMINE AND FAMINE RELIEF POLICY 


229 


did not mean any substantial improvement in the over-all posi- 
tion during the years 1942-43 and 1943-44 as compared with 
previous years. The focd situation in fact has further deterio- 
rated since then. The lesson of this meagre result is that the 
ultimate solution of the Indian food problem does not entirely 
lie in the direction of measures adopted under the Grow-'More- 
iFood Campaign. 

18 Famine Commission on Agricultural Policy : The 

Famine Commission was appointed in 1944 with two purposes in 
view (a) to investigate the causes of the Bengal Famine of 1943 
and (b) to suggest future lines of policy with respect to food and 
agriculture. The first report of the Commission was published 
early in 1945, and dealt with the Bengal Famine. The second or 
Final Report came out later in the year. In this report the 
Commission surveys the agricultural problem of India in all its 
aspects. This is the most comprehensive survey carried out in 
this field since the Royal Commission on Agriculture reported in 
1928. 

Regarding the future food and agricultural policy the main 
lines suggested by the Commission are given below : — 

(0 “ The state should recognize its ultimate responsibility to 
provide enough food for all.”* 

(ii) Cereals are the basic food of the people. India should 
aim at self-sufficiency in this respect. India is normally self- 
sufficient in other cereals except rice. The most important deficit 
provinces in rice are ; Bombay, Madras, Bengal, U. P. and Bihar 
and the States of Travancore and Cochin. By 1960 rice require- 
ments of these areas will increase by 15 per cent and annual 
supply must increase by about eight millions. Some increase can 
be made by better irrigation facilities and application of fertilizers, 
but India still will have to depend on imports for a long time. 
The Commission does not favour change in cereal diet of rice- 
eaters. They must remain rice-eaters. The ideal should be 
complete self-sufficiency in cereals. Yield of wheat and millets 
can also be increased by better manure and application of dry 
farming respectively. 

(Hi) The cultivator should be ensured a reasonable return 
from cereals through a policy of price control. The state must 
determine from time to time the minimum price of rice and 
wheat which are fair to the producer, and maximum price fair to 
the consumer and ensure that prevailing prices will fall within 


1, Report, p. 113. 



230 ECONOMICS OF INDIA AND PAKISTAN 

this range.^ This will imply control of imports and keeping of 
adequate reserves to meet an emergency* 

(iv) There should be an increased production of certain pro- 
tective and supplementary foods* Mere increased production of 
cereals will not improve the diet of the people. The Commission 
endorses the recommendation of the United Nations’ Con- 
ference on Food and Agriculture, that the dietary standards or 
allowances based upon a scientific assessment of the amount and 
quality of foods, in terms of nutrients which promote health, 
should be adopted as “ the ultimate goal of food and nutrition 
policy.” Among such are vegetables, fruits, milk, fats, fish 
and eggs. 

(v) Agriculture should be recognized. The above production 
programme will depend upon the labours of millions of cultiva- 
tors large and small, unless they can benefit from the resources 
made available by science, progress will be impossible. Accord- 
ingly the Commission devotes considerable attention to the 
question of land tenure, rent, co-operation and agricultural 
economy in general. We have discussed such questions already 
in this book. 

(vl) Finally the development of industry is emphasized. In 
order to increase agricultural production and improve the nation- 
al diet,” write the Commissioners, simultaneous industrial 
development to augment the total wealth or the country is 
essential.” 

19. Minutes of Dissent ; Two minutes of dissent are 
appended to the Report. One is by Mian Afzal Hussain who 
argues that the Commission's emphasis on self-sufficiency in 
cereals, and their taking the rice-eater’s diet as unchangeable, is to 
support tradition rather than science. He believes that over- 
emphasis on cereals is misplaced, it gives an exaggerated impor- 
tance to such a source of food, and such a policy will be a serious 
obstacle in the path of a satisfactory solution of the food problem 
of India, in a manner as will improve health, raise physical 
efficiency, increase capacity for work and lead to better mental 
growth.” It is abundant health,” he continues, not mere 
satisfaction of hunger, that should be the aim of a food policy. 
India is suffering, and in fact has been suffering, for some decades 
from a very acute famine of “ protective ” foods ; which has 
brought about physical decline and inefficiency, both in men and 
cattle, and if not attended to immediately may have serious 


1, Ibid> p. 118. 



FAMINE AND FAMINE RELIEF POLICY 


231 


consequences in an emergency,’’^ We are in complete agreement 
with the position taken by M. Af^al Hussain. Eminent authori- 
ties like the Royal Commission on Agriculture,^ Sir John RusselP 
and Dr, Wright have also expressed similar views. 

The second Minute of Dissent is by Sir N. B. Nanavati. He 
does not agree with the Commission in their non-committal 
attitude towards permanent settlement and is definitely in favour 
of its abolition not only on economic but also on moral grounds. 
He also suggests a number of Agrarian reforms to remove the 
various disabilities and handicaps under which the agriculturist 
works in India. Among these are : small and fragmentary hold- 
ings, lack of incentive due to defective tenure, indebtedness, 
lack of capital, defective marketing, loss of labour time, lack of 
crop control and planning. These have been discussed by us at 
relevant places in this book. Sir Nanavati is in favour of state 
ownership of land, with occupancy rights to cultivators, consoli- 
dation of holdings, more equitable taxation of land, restrictions 
on transfer of land, etc. “ The fundamental problem of agricul- 
ture,’’ he concludes, ‘‘ is to transform this occupation from a 
mode of living into a business proposition for the benefit of the 
cultivating classes.” For this comprehensive and to some extent 
revolutionary measures are necessary. “Without such measures 
it is impossible effectively to solve for this country the most 
baffling problem of our economy, namely, poverty in the midst of 
plenty.”^ 


1. Report, p. 341 (Minute by M. Afzal Hussaib). 

2. Report, Agriculturai Commission, p. 493 

3. Russell, Report, p. 21. . . 

4. Famine Report, p. 375 (Minute by Sir M. B. Nanavati)- 



CHAPTER X! 


LAND REVENUE POLICY 

1. Introduction ; Land Revenue, as an important source of 
income of the State, will receive our attention in the chapter on 
Provincial Finance. Here we are concerned with the land 
revenue policy of the Government from the point of view of the 
burden of this charge on agriculture. This burden has been con- 
demned and justified with equal force. The systems of land 
revenue assessment, the methods of calculating the charge, and 
the manner of its collection, have all been attacked from time to 
time in the Assembly, the Press and from the platform. The 
indebtedness of the peasantry, their chronic poverty, even natural 
calamities like the famines, have been attributed to this 
demand on the part of the Government. The reform of the 
system has been urgently stressed, though there appears to be 
considerable divergence of opinion as regards the directions in 
which reform is needed. In this chapter we shall first describe 
the various land revenue systems prevailing in India, then we 
shall examine the theoretical basis of the policy of the Govern- 
ment and, finally, we shall evaluate the various reforms that have 
been suggested to make the system more equitable. 

2. Land Revenue Systems ; The land revenue systems pre- 
vailing in India may be classified from two points of view : 

(0 Whether the land revenue is fixed once for all, or 
whether it is revised periodically. The former is known as the 
‘‘ Permanent Settlement.'^ This system was first introduced in 
Bengal in 1793, and was later extended to parts of the United 
Provinces and Madras. The latter system is known as the 
Temporary Settlement." Here the period of revision varies from 
20 to 40 years. This system prevails in those parts of India which 
are not subject to the Permanent Settlement. Roughly, about 121 
million acres (or 19 per cent of the total cultivated areas in 
British India) are under the Permanent Settlement, the remain- 
ing 533*5 million acres (81 per cent) being under Temporary 
Settlement. Of this latter 51 per cent is under the Village Com- 
munity type of tenure. 

(ii) The second basis of classification is the land tenure. We 
have already studied the systems of land tenure that obtain in 



LAND REVENUE POLICY 


233 


India* Here the point is to see on whose shoulders is placed the 
responsibility of paying the land revenue. Thus : — 

(a) Under the “Zamindari’’ system^pf tenure it istheZamin- 
dar who is made the owner of the land and hence is responsible 
•for payment to the Government. He in his turn realizes the 
amount from actual cultivators. 

(b) Under the Ryotwari system, every holder is individually 
responsible for payment of land revenue to the Government, the 
latter is regarded as the owner of land. The distinguishing 
feature of this system/’ in the words of the Taxation Enquiry 
Committee, “ is that the settlement is made with the cultivating 
proprietor year by year, and that he is at liberty to relinquish 
part of his holding, or subject to certain conditions, to add to it 
by taking up waste lands as opportunity arises.’’^ But even in 
Ryotwari tenures middlemen have emerged by the practice of 
subdetting and the land revenue, in such cases, is realized not 
from the actual cultivators but from the middlemen rent- 
receivers who were the original occupants. 

Thus whether the system is Zamindari or Ryotwari, land 
revenue may be realized, either (0 from those who “ own ’’ the 
land whether they are zamindars, members of joint village com- 
munities or ryots, but who do not themselves cultivate it, or (//) 
from actual cultivators whether “ryots’’ as in ryotwari districts 
or owners as in joint villages of peasant-proprietors. 

Those who merely receive rent from their tenant-cultivators 
“ are to a great extent mere parasites who fatten on the product 
of the cultivators.”^ This class of non-working landlords — 
absentee landlords as they have come to be — is tiae creation of 
the British rule. This was brought about by the wrong applica- 
tion of British ideas of land ownership to Indian conditions. 
Though the system was quite convenient for realising land 
revenue, it led to the exploitation of the actual tillers of the 
soil by the landlord. This is true of Permanent as well as Tem- 
porary Settlements, but especially of the former. 

3* Permanent Settlement ; A “ settlement ” may be defined 
as the official assessment of the land revenue due in British India 
to the Government from land. It is preceded by a more or less 
full survey, classification, and valuation of the land and an 
inquiry into the rights of all persons concerned.*^ A settlement, 
as we have noted above, may be Permanent or Temporary. 


1. Report: Indian Taxation Enquiry Committee (1924-25), d 43. 

2. V. Anstey, Economic Development of India, p. 99. 

3. Ibid, p. 9d. 



234 


ECONOMICS OF INDIA AND PAKISTAN 


The first Settlement was made by the British in Bengal where 
they introduced the Permanent Settlement in 1793. The officials 
of the Mughal rulers, who were merely revenue collectors on 
commission basis, were made the “Zamindars” or the landowners. 
They were mistaken for landlords in the English sense. The 
revenue due from the Zamindars was fixed in cash in perpetuity. 
The rate fixed was 10/11 of the rents realized by the Zamindars 
at the time, 1/11 being left to the latter as their share. This 
was quite a heavy burden at the time but later the value of land 
gradually rose due to increased security and higher prices of 
produce. This led to increase of rents and hence the incomes of 
the Zamindars from land rose considerably. In 1900 it was 
officially estimated that the land revenue paid to Government 
from permanently settled areas amounted to less than Rs. 4 
crores, whilst rentals, in the same areas amounted to no less than 
Rs. 164 crores.^ 

Permanent Settlement was extended to Benares in 1795. 
There also the Bengal model was followed. The existence of 
joint-landlord villages was ignored and the Government dealt 
with one of the chief co-sharers or some other prominent person 
on the basis of Permanent Settlement, In Madras also the same 
system was tried. It succeeded in the north of the presidency 
and certain parts of the south, where individual landlords, des- 
cendants of former ruling chiefs, existed. But in the major 
portion of the presidency there existed Ryotwari villages where 
no such intermediaries were available. Attempts were made to 
create substitutes by auction to highest bidders. But the system 
failed miserably and had to be replaced by the Ryotwari system. 
But before this system was adopted between one- fifth and one- 
third of the presidency had already come under the Permanent 
Settlement. 

During the 19th century proposals were made from time t6 
time to further extend the system of Permanent Settlement. But 
all such proposals were finally rejected in 1883. Since then the 
question of Permanent Settlement has been regarded as closed. 
Recent controversy, however, led to the appointment in Bengal 
of a Land Revenue Commission (1938-40) which recommended 
the abolition of the system. 

4. The Bengal Land Revenue Commission^ (1938-40) : The 

Bengal Land Revenue Commission was appointed in 1938, under 
the chairmanship of Sir Francis Floud, to examine the land 
revenue system of Bengal with special reference to Permanent 

1. Govt» Resolution on Land Revenue Policy, 1902, p. 82. 



LAND REVENUE POLICY 


235 


Settlement. The majority of the Commission favoured the 
abolition of Permanent Settlement on the following grounds : — 

(a) It has deprived the Government of share of increase in 
the value of land which has resulted on account of the increase 
in population and extension of cultivation. 

(b) It has involved the Government in loss of revenue from 
minerals and fisheries. 

(c) It has deprived the Government of intimate knowledge 
of rural conditions as afforded by the Ryotwari , system. 

(d) It has imposed an iron framework which stifles initiative 
and enterprise of all classes. 

(e) It has encouraged excessive amount of sub'-infeudation, 
creating a number of intermediate interests between the Zamindar 
and the actual cultivators, which has in some districts reached 
fantastic proportions. 

The Commission favoured the replacement of this system by 
a Ryotwari system and added : Whatever may have been the 

justification for the Permanent Settlement in 1793, it is no longer 
suited to the conditions of the present time. A majority of the 
Commission have also come to the conclusion that the Zamindari 
system has developed so many defects that it has ceased to serve 
any national interest. No half measures will satisfactorily remedy 
its defects. Provided that a practicable scheme can be devised to 
acquire the interests of all classes of rent receivers on reasonable 
terms, the policy should be to aim at bringing the actual cultiva- 
tors into the position of tenants holding directly under Govern- 
ment.^ 

The recommendations of the Commission, we understand, 
are receiving consideration by the Bengal Government. It is 
hoped that the reforms recommended by the Commission wiU 
materialize as early as practicable. Other permanently settled 
areas in U. P. and Madras should also follow suit. The case 
against this system is incontrovertible. No agricultural progress 
is possible unless the tiller of the soil is saved from exploitation 
by the 'parasitic class of Zamindars. This is also true or the 
absentee landlords even in the temporarily settled areas. More- 
over, the principle of ‘^equality of sacrifice in the apportion- 
ment of tax burden also requires this reform. 

1. Bengal Land Revenue Commission Report, Vol. L, p. 42. 



236 ECONOMICS OF INDIA AND PAKISTAN 

5, Temporary Settlement : Temporary settlements are not 
of a uniform character. Here differences arise due to (1) differ- 
ences in persons from whom the charge is collected ; (2) differences 
in the period of settlement; (3) difference in the methods of 
calculating the charge, ie., (a) in arriving at the “ net assets and 
(h) the proportion of such assets taken by the Government. 

(1) As regards the agency by which the charge is paid, as we 
have already seen, the determining factor is the system of land 
tenure. From this point of view we arrive at the following 
classification : — 

A. — Zamindari Settlements or settlements of single estates 

under one landlord. 

(i) Temporary Settlement with the Zamindars, as in areas 

not brought under Permanent Settlement. 

(ii) Temporary Settlement, as with Talukdars of Oudh. 

B. ~Mahalwari Settlements, or settlement of estates of village 

communities. 

' (/) Mahalwari Settlement in. the United Provinces where 

there are no talukdars but only village communities., 

(n*) Mahalwari Settlement of the Punjab. 

(in) Malguzari Settlement of the Central Provinces. 

C. — Ryotwari Settlements — where the settlement is made with 

individual holders or occupants, 

(0 The Madras system. 

(a) The Bombay and Berar system, 

iiit) The Assam and Coorg system. 

■ (2) As regards the periods of settlements, in the Central 
Provinces the period may vary from 2Q to 30 years, in Berar from 
25-30 years ; in Madras it is 30 years and in the United Provinces 
and the Punjab it is 40 years. 

(3) In the calculation of the net assets^ two systems that of the 
Punjab and of Bombay may be noted as examples. In the Punjab 
net assets “are generally estimated on the basis of recorded 

1. “Net-assets” of an estate or group of estates means the estimated 
average annual surplus produce of such estate or group of estates remaining after 
deduction of the ordinary expenses of cultivation as ascertained or estimated. 
A^^^TTT ^ Land Revenue Act XVII of 18S7 as amended by the Punjab 



LANE) Revenue policy 


237 


rentals, which are mostly in kind. The terms ‘ net assets ’ and 
rent are not identical but generally a full and reasonable rent paid 
by a teriant-at-will is regarded as a sufficiently near approximation 
to the net assets and the safest guide and measure in estimating 
them. The assessments therefore in practice are based on rents 
In the words of the Punjab Land Revenue Committee of 1938, 
* net assets ’ of a tract represent what the land of the tract might 
ordinarily be expected to fetch in rent less all costs incurred in 
earning that rent. In other words net assets and normal rent, 
less these costs, are synonymous, and so defined they may be 
briefly called landlords’ net assets.”^ 

Thus under the Punjab system costs of production are not 
calculated in detail. The share of the produce going to the tenant 
roughly is regarded as the cost along with what the landlord may 
have incurred in earning his share. The landlords’ not assets thus 
estimated are also regarded as the peasant proprietor’s net asset. 
More of this later. 

Our second example is represented by the Ryotwari system of 
Bombay. “ The Bombay system was purely empirical for a long 
time, as is shown by the fact the decision of the Settlement 
OfiScer as regards the revenue rates depended not upon the formal 
working out of results based on theory, but rather upon the 
subjective impressions of local knowledge and expeiience. In 
recent years, however, the rental value as ascertained by records 
of leases and sales and other similar factors, was being adopted 
as an important basic factor for fixing the assessment in practice. 
Rental value, which has now been 'definitely and legally adopted 
as the basis for fixing the’ maximum assessment, is defined by the 
Bombay Land Revenue Code (Amendment) Act (1939) as ‘the con- 
sideration (including premia, if any, or any sum of money paid or 
promised, or a share of crops or service, or any other thing of value 
rendered periodically or on specified occasions) for which land is 
or could be leased for a period of one year for its most advan- 
tageous use.’ The Settlement Ofiicer is directed to ascertain, in 
the manner prescribed by rules issued under the Act, the rental 
value of lands for the purpose of settlement.”’^ 

As to maximum proportion of the net assets or the rental 
value charged as revenue, again differences prevail. Up till 1928 
in the Punjab it was 50 per cent,^ and since then* it has been fixed 

1. Indian Taxation Enquiry Committee 1924-25* p. .52, 

2. Report of the Land Revenue Committee (Punjab), 1938, p 31. 

3. Jathar and Beri : Indian Economics, Vol I (7th Edition), p. 44. p. 443. 

4- In practice it rarely reached even 30 per cent of net assets. . See Punjab 

Land Revenue Committee Report, p. 2 (Table}. 



238 


ECONOMICS OF INDIA AND PAKISTAN 


at 25 per cent of the net assets* In the temporarily settled areas 
of Bengal the percentage is as high as 70 per cent; in Bombay it is 
35 per cent* Generally speaking, the maximum proportion of net 
assets taken varies from 25 to 50 per cent* These, however, are 
standard rates, fixed at the time of the settlement, the actual 
rates charged vary with movements of prices and general condi- 
tion of the crops. The land revenue, moreover, may be suspended 
or even remitted in part or whole in exceptionally bad circum- 
stances for the payer, 

6, The Incidence of Land Revenue : Is the land revenue 
burden excessive ? The defenders of the policy of the Govern- 
ment have argued that the burden is far from very heavy. 
Historically the charge is considerably less now than it was either 
under the Hindu or the Muslim rulers. Thus Manu took from a 
12th to a 6th of the gross produce, and in “ times of war or other 
public calamity as much as fourth.^ The share was more under 
the Muslims but finally stood at a third of the gross produce 
under Akbar. The Sikhs in the Punjab took one-half and some- 
times even more. As a rule the demand under the Sikhs varied 
from two-fifth to one-third of the gross produce. It was in 
1860 that the British fixed the maximum demand at one-half of 
the net assets, though actually it came to less than 30 per cent of 
the rental. Measured in terms of gross produce the average 
'charged for three years ending 1936-37 was only 6.7 per cent. “ If 
we were to take the last three pre-depression years,” wrote the 
Punjab Revenue Committee (1938), ‘‘ the proportion would prob- 
ably be less than 5 per cent. Compare with this the 33 to 40 
per cent taken by the Sikhs a hundred years ago*”^ 

The average land revenue per cultivated area in the Punjab 
came to Re. 1-9-2 per acre for three years ending 1936-39. 

The following figures^ give incidence of land revenue per 
cultivated acre and per head of population ingl939 in some im- 
portant provinces of India : 

INCIDENCE OF LAND REVENUE IN 1939 


I’rovince 

Bengal 

Permanent Settlement 
Temporary Settlement 

Oudh 

Permanent Settlement 
Temporary Settlement 


Per cultivated Per head of 

acre population 

Rs. A. P. As. P. 

1 4 0 0 12 0 

3 4 0 0 11 0 

16 0 1 15 0 

1 15 0 19 0 


1. Taxation Enquiry Committee Report (1924-25) p. 39. 

2. Report; p.lL 

3. Taken from Wadia and Merchant ; *Our Economic Problem’, p. 246. 



LAND REVENUE POLICY 


239 


Punjab t — 
Bombay : — 

Ryotwari 
Madras : — 

Ryotwari 

Zamindari 


1 15 0 

1 n 0 i 15 0 

2 8 0 1 25 0 

1 6 0 0 14 


Thus it is argued by the supporters of the present system that 
the burden of land revenue per acre as well as per head of 
population is extremely low and as compared with what it used 
to be in the past, it is insignificant. Further, it is asserted that 
even if this burden was abolished it would go to a class of rent- 
receivers and would not benefit the actual cultivator.^ Moreover, 
it is suggested that the prosperity of the cultivators has increased 
under British rule while the tax burden has been reduced. And 
finally, that the land revenue is not a tax but a rent, and as such 
it does not enter into the cost of production and does not affect 
the prosperity of the cultivator. 

Whether the land revenue is a rent or a tax is a controversial 
issue which we shall examine presently. As regards the other 
arguments given to support the thesis that the land revenue is 
not a serious burden on the Indian peasantry the following reply 
may be given : — 

(/) Under the Hindu and the Muslim rulers the land revenue 
was fixed and collected in kind, therefore its burden varied with 
the capacity of the assessee to pay. At present even though re- 
missions and suspensions are granted the charge being fixed in cash 
it becomes very oppressive when prices are low. The amount and 
methods of collection now are much more rigid than they used 
to be imder the Indian rulers. 


(a) The pressure on land has considerably increased during 
the British period due to increase in population and decay of 
handicrafts. Even after a high percentage of gross produce was 
taken away by Indian rulers the total produce per family being 
larger the residue was enough to maintain them in their custom- 
ary comforts. Now the land per family is very small and hence 
their total produce is hardly enough to maintain them for the 
year. Even a small portion of this small supply may impose 
painful burden on the family resources. 

(iii) Even if we accept the proposition that the present 
burden is lighter than it used to be several hundred years ago, it 
does not justify the present burden if it is an unjust burden. 


1. Anstey * op. cit., p. 377. 



240 


ECONOMICS OF INDIA AND PAKISTAN 


We 'must not apply the 16th century standards of justice when 
we are living in the 20th century. A revolution has occurred since 
the Moghal times in the conceptions of Government and the 
relations of the rulers and the ruled. This has happened not 
only in India. We must judge the justice of the land revenue 
on its merits, according to modern theories of taxation. 

(iv) To say that the benefit of abolition will go only to the 
rent receivers will hardly stand examination. Many land revenue 
payers are peasant proprietors ; they will be directly and immedi- 
ately benefited from any reduction or abolition of this charge. 
As regards the big absentee landlords (if they have to' continue 
at all) in their case the burden is too light rather than too heavy. 
They should pay higher amounts not as land revenue but as tax 
on agricultural incomes, 

(v) As regards the increase in the prosperity of cultivators 
this is not a definitely established fact. Opinions differ whether 
the average cultivator today enjoys a more wholesome food, 
clothing and health than he used to do in centuries gone by. 
Even if his poverty has decreased (we can hardly talk in terms of 
prosperity), that is no justification for putting a burden on him 
for which his economic capacity does not befit him. Have the 
classes who have really prospered under the British rule paid 
their quota in similar proportion ? 

(vi) The real reason why relief is denied to the peasant 
cultivator is that, even if uneconomic holdings are exempted 
from land revenue, the effect on Government finances will be so 
disastrous as to preclude all reforms in this direction. We shall 
come to this point later. ^ 

Now let us examine the theory that since land revenue is not 
a tax but a rent suggestions for the application of the principles 
of taxation to it are not justified, nor does its payment affect 
agricultural prosperity since it does not enter into cost of 
production. 

In this connection we have to examine two propositions : iO 
Whether land revenue is a tax on rent, (/i) In practice, even if 
it is a rent, does the cultivator get reasonable return for his 
labour and enterprise before he pays the land revenue ? In 
other words, does it come out of the true economic rent of the 
land or does it encroach upon the fair returns to the cultivator 
as labourer and enterpreneur. 



LAND REVENUE POLICY 


241 


7, Tax or Rent: Whether the land revenue is a tax or 
rent is a controversy of long standing but with little practical 
bearing on matters of policy. Baden Powell has called it a 
war of words” Even if we agree that the State in India is the 
universal landlord, and hence the land revenue is a rent, this 
does not justify the imposition of this charge without reference 
to the welfare of the people. Even a landlord, if he is enlighten- 
ed, may exempt uneconomic holdings from rent. When the 
landlord is also the State the welfare of the subjects and not any 
theoretical right to the imposition should be its primary con- 
sideration. If the small holder requires relief, he must get it 
whether the payment he is making as land revenue is theoretic- 
ally regarded as a tax or a rent. 

But as it is, certain exceptions apart, the State in India does 
not claim the right to the ownership of land. This subject we 
have already discussed in a previous chapter. We may repeat 
here, as Baden Powell has pointed out, that with regard to the 
Zamindari districts of Bengal, North Madras, and Oudh, and the 
joint village districts of the United Provinces, and the Punjab the 
British Government had definitely stated that property right in 
the soil ‘‘ has been declared vested in the land-holders ” and any 
reservations made, in the latter areas, referred not to State 
rights but to the rights of subordinate holders and tenants”< 
In Roytwari districts the State has a residuary right ” with 
regard to vacated and waste- land, but has no power to eject a 
cultivator “ except as a result of process in default of revenue 
payment.” “ Hence,” he concludes, “ the ‘recognised ownership' 
of Government does not exist at all in a large part of India, and 
in other parts only in a very qualified manner.”^ 

But even then we cannot categorically say that land revenue 
is not a rent but is a tax. This charge contains features of a tax 
as well as a rent. Since it is a compulsory levy of the State 
periodically collected it resembles a tax. But since almost'^ 
all lands have to pay it and it has no element of progression, and 
in some provinces it is in addition to a tax on agricultural 
incomes leviable also in others, one might think it is a rent. 

“ Perhaps it would be nearest to say,” remarks Vera Anstey, 

“ that it is a tax on rent, and that as ajarge proportion of the 
actual cultivators in India are in a sense “ land-owners,” there is 
no doubt that the Government is receiving as revenue an income 
that would otherwise go into their pockets.”"^ 

1. Quoted by V. Anstey» op. cit., p. 376. 

2. Some lands ate revenue-free grants* 

3. V. Anstey, op. cit., p. 376. 



242 ECONOMICS OF INDIA AND PAKISTAN 

8, Lines of Land Revenne Reform : As far as the reform- 
ing of the present system is concerned, as already said, whether 
the land revenue is a tax or a rent is a matter of no consequence. 
Various kinds of suggestions have been made to improve the 
present system. Usually two objects are kept in view in this 
connection : (/) Relief to the holders of very small holdings. 
(a) More equitable distribution of the burden of taxation as 
between the larger land revenue payers and payers of other 
forms of taxes. 

The various suggestions for reform may be indicated as 
under : — 

(1) Abolition of the Permanent Settlement. This we have 
already considered and approved. 

(2) Some people would like to bring the present temporarily 
settled areas also under Permanent Settlement. 

(3) Some suggest the abolition of the land revenue as such 
and substitution in its place an income-tax on incomes derived 
from agriculture. 

(4) Others would like to apply the principles of income-tax 
to land revenue, i.e., exemption of small holdings and imposition 
of a graduated rate on larger owners. 

(5) Finally, some writers expose the defects of the manner in 
which net assets are calculated especially in the Punjab and 
would like to make this estimate more scientific. 

9* Temporary vs. Permanent Settlement : During the 19th 
century, as already noted, proposals were made again and again to 
induce the Government to introduce Permanent Settlement all 
over India. In 1900 R. C. Dutt in his “ open letters to Lord 
Curzon criticized the land revenue policy of the Government 
attributing the dreadful consequences of the famines at the close 
of the century to this policy. Dutt favoured a Permanent Settle- 
ment to which he attributed the prosperity and resourcefulness 
of the Bengal peasantry. Along with certain retired European 
members of the Indian Civil Service he presented a memorial to 
the Secretary of State. His ‘‘ open letters” led to the issue in 
1902 of the famous memorandum of the Government of India, in 
which their land revenue policy was outlined and defended. 
The issue of Permanent Settlement ceases to be a live issue for 
some time and even now it has very few supporters. But they 
are not non-existent. In 1924*'‘25 a number of witnesses favoured 



LAND REVENUE POLICY 


243 


this system before the Bombay Land Revenue Assessment 
Committee. More recently three important members of the 
Bengal Land Revenue Commission (1938-40) in a minute of 
Dissent argued in favour of Permanent Settlement though> as we 
have seen, the majority recommended its abolition. 

The Permanent Settlement is supported on the following 
grounds ; 

(a) From the financial point of view it has insured a fixed 
and stable revenue for the State which can be collected without 
much expense. (But as has already been noted it has deprived 
the State of share in the growing rentals).^ 

(b) It has helped politically in the consolidation of British 
rule indndia by creating a loyal class of Zamindars. (To this 
doubtful advantage it may be replied that British rule has been 
consolidated elsewhere too and without permanent Settlement). 

(c) It has created leaders in the political and social fields 
who have helped the ryot by spreading ‘‘ education, sound ideas 
and sanitation.'’ (This advantage also seems doubtful especially 
the political leadership of a loyalist class). 

(d) It is further said that the system has created a prosperous 
peasantry with resourcefulness and enterprise. (But famines 
have been as common in Bengal as elsewhere. It is difficult to 
understand how peasantry can develop initiative, enterprise and 
resourcefulness when the absentee landlord is there to squeeze 
out any surplus over mere subsistence as soon as it arises. If the 
revenue was directly settled with the cultivators then perhaps 
the peasantry would have prospered, with no fears of future 
enhancements. As it is the Zamindars have prospered at the 
expense of the cultivators and the public treasury). 

The disadvantages of Permanent Settlement we have already 
noted. Here we may conclude that the introduction of Perma- 
nent Settlement can be beneficial to the people only if all 
intermediaries between the State and the tiller of the soil are 
abolished so that the advantages of future increment of the 
rental should be enjoyed by the actual man behind the plough. 

10. Relief to the small Holders : One school of thought 
suggests the entire abolition of the land revenue charge and 
substitution in its place of an income-tax on agricultural incomes. 
Of course agricultural income-tax can be introduced for larger 
owners without abolition of the land revenue. We have 

1. The Bengal Land Revenue Commission (1938-40) has estimated this loss 
at from Rs* 2, to bTs. 8 ccores annually during the present generation. 



244 


ECONOMICS OF INDIA AND PAKISTAN 


examined this issue in a subsequent chapter under Public Finance. 
The abolition of land revenue aims primarily at relieving the 
small holder of the burden of this payment. In this connection, 
therefore, several questions have to' be carefully considered 
before any decision can be taken. Such are : — ■ 

(0 Is it desirable and justifiable on political, economic and 
ethical grounds that the small holder should be entirely freed 
from making any direct contributions to the revenues of the 
State ? 

(a) If he is given this relief, how far will it make a signi- 
ficant improvement in his standard of living or methods of 
production 1 

(Hi) What will be the extent of the financial loss to the 
Government ? Could this loss be made up by alternative 
sources ? If not, what are likely to be the consequences of this 
curtailed government expenditure on the welfare of the people- 
including the exempted small holders ? 

(/) The land revenue assessment and collection no doubt 
necessitates the keeping of records of land, its produfce and 
property rights, etc., and these records are of great value to the 
administrator and the economist. Politically land revenue pay- 
ment: is linked with the voting right, though some other system 
of suffrage could be devised. But these are only incidental 
advantages. The system must be justified on more fundamental 
grounds. The Punjab Land Revenue Committee drew attention 
to the ethical and social aspects. The land-owner especially in 
the Punjab enjoys special privileges^ and protection given by the 
State. Hence he should make some contribution to the State 
treasury by virtue of his being a landholder. One witness ^ 
asserted that the small holder would not like being exempted 
from the land revenue charge which enhances his self-importance, 

1. “ The land of these Agriculturists cannot be sold in execution of a 
money decree or mortgaged to a non-agriculturist for more than 20 years. A 
landowner cannot be evicted by a civil court without the intervention of the 
revenue authority, and he is entitled to retain enough land for the maintenance 
of himself and his family. His plough, cattle, implements and ^eed cannot be 
attached. If he is sued and his interest charges exceed certain statutory limits, 
they can be reduced. The burden of proving that consideration has passed is 
on the money-lender nor can a decree be passed against him for more than 
twice the principal. When he dies his ancestral land is not liable for the pay- 
m* nt of his debts tinless charged upon it. Finally under an Act of 1934 Conci- 
liation Boards ate being set up all over the province to settle his debts.” 
Report p. 74. 

2. Written memorandum by Six G. de Montmorency, Report, p. 176, 



XAND REVENUE fCLlCl 


245 


dignity and izzat. This appears very doubtful* Small holders 
would jump at the 4dea of exemption* As regards the priv- 
ileges ” the protection given by the State to a xlass liable to be 
exploited by the still more' privileged classes, cannot be put 
forward as a justification for imposing a tax on the former, if they 
have no capacity to bear this burden and if other classes are not 
taxed to the same degree of burden* 

Regarding (ii) Mrs* Anstey holds that ‘‘ judging from past 
experience, it appears likely that part of the increased income 
would be squandered on increased expenditure on ceremonies, 
and that the rest of it 'would be swallowed up by an increase of 
population, rather than in any improvement in the standard of 
life or methods of cultivation,'' ^ This again is a very flimsy 
argument. Does the Government while considering taxes on 
other classes of population probe into the way the money would 
be spent if the tax is reduced or abolished J Certain social 
ceremonies are as important to the poor cultivator as are various 
kinds of recreations and social expenditures to the better-placed 
classes. Of course the poorer sections should be instructed as to 
the manner in which they can get the best advantage from their 
small incomes. This should be done by extending educational 
facilities not by taking away a part of their meagre incomes in 
the form of a tax* 

(iii) Finally, we come to the financial consideration. If land 
revenue is'abolished and an income-tax is imposed on agricultural 
incomes with the usual exemption limit, the revenue of the 
Government will fall very seriously. Even from the bigger 
landlords the income-tax charge will bring much less than the 
land revenue charge. The latter is roughly 25 per cent of their 
net income from land. The average income-tax rate will be 
much less. Even giving exemptions to small holders without 
abolishing the charge on the larger landholders will mean a 
serious curtailment of revenue. The Punjab Committee estimated 
that if those who paid less than Rs* 500 (with net assets of 
Rs. 2,000 — same limit as in income-tax) were exempted the total 
land revenue will be reduced from Rs. 44 crores to 30 to 40 
lakhs" ^ Even if incomes up to Rs. 250 were exempted, the 
Committee estimated the loss at over Rs. 24 crores. In terms 
of land revenue if only those who pay Rs. 10 a year or less are 
exempted the loss to the Government will be to the tune of 
Rs. 78.6 lakhs. Thus while Rs. 10 a year will make no significant 


1. Anstey : op. cit., p. 377. 

2. Report, p. 72. 



246 


ECONOMICS OF INDIA AND PAKISTAN 


change in the economic position of the small holder it will 
create a serious gap in the finances of the Government and will 
curtail useful activities of the Government unless this gap can 
be made up from some other sources. “ In a poor country like 
India/’ in the words of the Punjab Committee, “ the amount 
of revenue that can be raised from the better^to-do classes is not 
very large, and the process commonly known as soaking the 
rich,” which is fruitful enough in a wealthy country like England 
has only a very limited scope. If any considerable sum has to 
be raised, it cannot be easily done without spreading the fiscal 
net over the whole community and levying a small sum from as 
many people as possible.^ 

We are inclined to agree with this view. Unfortunately, it 
is impracticable to relieve the small holder from the entire 
burden of land revenue. We also endorse the recommendation 
of the Punjab Committee in which they recommended ^ relief to 
the owner cultivator by reducing his charge by 25 per cerxt after 
assessment at the usual rate. 

11* Definition of Net Assets ; Another attack on the land 
revenue policy of the Government especially in the Punjab relates 
to the methods of arriving at the net assets. We have already 
seen how net assets in the Punjab are estimated. They are net 
assets of the landlord. Professor Brij Narain contends that 
these net assets are not the true net assets when applied to the 
owner cultivator. In the words of Prof. Brij Narain : “The 
non-cultivating landlord is able to exploit the tenant because 
of the constantly growing pressure of population on the soil. 
Land is scarce relatively to demand, and there are no alternative 
means of earning a livelihood for the tenant class. Under such 
conditions it is not surprising that the landlords’ share should 
contain a large element of loot.” ^ 

The Land Revenue Committee, to meet this criticism, quoted 
comparative statistics based upon the data given in the Punjab 
Farm Accounts as follows : 


1. Report, p. 73. 

2. Report, p. 64. 

3. Land Revenue Reform in the Punjab, by the fnsdtate of AgrafiaH 
Reform, p, 10. 



LAND REVENUE POLICY 


247 


Net assets per acre based on 


(a) (b) 




Landlords* net 

assets 

Owner-cultivators* net 



i,e., the rent obtainable 

assets, i e 

, the gross 



for the 

land, less ex- 

income from direct 



penses 

directly 

con- 

cultivation 

less ail 



nccted with its 

cuiti- 

cultivation 

expenses 



vation 

(except 

land 

(including 

wages of 



revenue) 


manual labour but ex- 






cluding land revenue) 

Yeats 



Rs. 


Rs. 






Average 

Average 

1927-28 


••• 

42.85 


44.70 


1928-29 



44.79 

43.30 

52 62 

46.85 

1929-30 



4227 


43 23 


1930-31 



21.96 


15.39 


1931-32 



2223 

25.02 

2029 

23.19 

1932-33 

••• 


30.76 


32.53 


1933-34 



25,13 


24.56 


1934-35 



28.23 


31.81 


1935-36 

• •• 


32.37 

30,85 

38.86 

34.27 

1936-37 

... 


31.94 


32,15 



Their conclusion was that during this period of 11 years 
only in three years (/.e,, 1930-31, 1931-32 and 1933-34) the land*' 
lords’ net assets were higher than the owner-cultivators’ net 
assets. On taking averages of three periods of 3 years, 4 years 
and 3 years respectively it was only during the middle period in 
which owing to depression the owner-cultivator would have been 
at an advantage if net assets were calculated according to the 
method (bX 

These figures were forcefully challenged by Prof. Brij Narain, 
who contended that these figures are cooked figures, and of no 
value for scientific purpose.^ He asserted that true figures 
relating to the farm in question had been altered and moreover 
nothing was said about the “ assumed wages.” It appears the 
Committee took Rs. 120 per adult labourer per annum as wages 
in calculating cost of production for the owner cultivator. This 
was done for depression years as well as pre-depression years. 
This was unscientific according to Prof. Brij Narain. Taking a 
higher wage rate in proportion to higher prices in pre-depression 
years Prof. Brij Narain arrived at the following table^ comparing' 
his figures with the figures of the Committee. 


1. Agricultural Worker and Punjab Land Revenue Committee by Brij 
Narain, (issued by the Institute of Agrarian Reform), p. 10, 

2, Ibid, p. 17, 



248 


ECONOMICS QF INDIA AND PAKISFAN 


ACTUAL AND COOKED FIGURES PER ACRE 
Year Landlords’ net assets Owner culivator’s net assets 



actual 

cooked 

actual 

cooked 


Rs. 

Rs. 

Rs. 

Rs. 

1927-28 

37.57 

42.85 

29.36 

44.70 

1928-29 

39.04 

44.79 

36.45 

52.62 

1929-30 

36.36 

42.27 

25.71 

43.23 


Thus taking the actual’’ figures landlords’ net assets are 
higher than owner cultivators’ net assets in each of the three 
years* 

Prof. Brij Narain further contended that if adequate wages 
were allowed on this particular farm the percentage of costs to 
gross income was as high as 68.4 while the Settlement Officer 
who assessed the Lyallpur tehsil assumed this percentage to be 
56. In fact this Risalewala farm being a Government farm was 
not typical of the area. In other farms/ accounts showed fhat 
even allowing wages at Rs. 120 per annum per labourer the per- 
centage of total expenditure to gross income came to 82.03. ‘‘ If 
the cost is allowed for at 70 per cent of the value of gross 
produce,’’ concluded Prof. Brij Narain, ‘‘ net assets are found to 
be Rs. 68,35,363 (Lyallpur Tehsil) instead of Rs. I,000,55j363. 
The total standard demand is reduced from Rs. 25,13,977 to 
Rs. 17,08,841 and the demand per acre from Rs. 6-8-2 to Rs. 4-6-9, 
a reduction of more than Rs. 2 per acre.”^ 

The Punjab Committee, however, was not in favour of 
changing the definition of net assets. They concluded : Con- 

sidering the increase in expenditure, the difficulty of obtaining 
reliable returns, and the doubt whether even at present prices 
change would be of advantage to the land revenue payer ; 
considering the fact that nearly sixty per cent of the cultivated 
area is leased to tenants, we are strongly in favour of maintaining 
the present system.” 

As regards Prof, Brij Narain’s criticism the whole issue hinges 
upon what rates of wages are allowed. “ The prices of these two 
crops ” (cotton and wheat) wrote Prof. Brij Narain were 87 per 
cent higher in pre-crisis years, it follows, that wages must be 
allowed at the minimum rate of Rs. 225 per annum per adult 
worker”^ (87 per cent higher than Rs, ,120 allowed for the 
depression period). 


1. Farm Chak 243 R, B. (see Ibid, p. 20.) 

2. Ibid, p. 2§. 

3. Report, op. cit., p, 39. 

4. Agricultural Worker, etc., op. cit,, p. 30. 



LAND REVENUE POLICY 


249 


Pror. Brij Narain himself accepts 1/3 of gross produce as 
enough to remunerate the cultivator for his labour, taking four 
or five years of normal prices/’ ^ He supposed the gross value 
of produce of half a square at Rs. 600* And he agreed in his 
evidence that two^ men would be required to cultivate half an 
acre* Thus Rs; 100 per labourer would be a fair wage. The 
average gross produce during the three pre-^depression years 
-(ending 1928-29) of the Resalewala farm^ (800 acres) was Rs; 
77,363 or 960 per acre or 480 for half an acre* On this basis the 
rate of wages in pre-depression years would have been Rs* 80 per 
labourer per year* Prof. Brij Narain accepted the figure of Rs. 120 
for depression years. This in itself was an over-estimate even for 
pre-depression years. 

Further he allows 87 per cent more upon Rs. 120 (Rs. 225) 
for pre-depression years as wages per labourer. Even if Rs. 120 
was legitimate wage rate it is not scientific to raise the pre- 
depression level in exactly the same proportion as the height of 
the pre-depression prices* This would mean that wages had 
fallen during the depression to exactly the same extent as prices. 
This assumption is obviously unjustified, because wages proverb- 
ially lag behind. It would appear therefore that Rs. 120 per 
labourer was a fair allowance for pre-depression years on the 
basis of gross produce, and then of a farm managed by Govern- 
ment, hence presumably giving higher per acre gross produce 
than an average farm. For depression years Rs. 120 would then 
be an over-estimate of wage rate. 

We are therefore inclined to agree with the conclusion of 
the Punjab Committee and especially since the subsequent rise in 
prices has altered the whole situation and has increased the 
paying capacity of the owner cultivator. We feel that the 25 
per cent rebate recommended by the Punjab Committee should 
meet the inequalities, if any, arising out of the indirect estimate 
of the owner cultivator’s net assets. In periods of depression 
apart from suspensions and remissions and temporary relief the 
sliding scale system introduced in the newly settled areas of the 
Punjab should considerably lighten the land reyenue burden on 
the small holder. 

12. The Sliding Scale System : New principles of assess- 
ment were formulated in the Punjab at the time of the resettle- 
ment of the Lyallpur district in 1935, These are known as the 

1. Ibid, p. 30. 

2. ibid, p. 15. 

3. Ibid, p. 15. 



250 


ECONOMICS OF INDIA AND PAKISTAN 


Sliding Scale System* The object of the new system was “ to 
enable the Government to pitch its demand high enough to take 
into account the possibility of prices rising to the average level of 
the last 20 or 30 years, and meanwhile to adjust this demand at 
each harvest to current prices.”^ 

According to the old system the standard rates did not 
change during the period from one settlement to another, of 
course remissions and relief could be given according to the 
character of crops* The great fall in prices after 1930 necessitat- 
ed this new system* The features of this system were described 
as below by a communt(iue of the Government : — 

(1) The communication prices proposed to be fixed by 
Government have been worked out in accordance with the 
revenue law on the average of 20 years* 

(2) Average revenue rates will be worked out according to 
those prices, and will determine the average rate for the assess- 
ment circle as a whole* 

Within the assessment circle the revenue rates will vary, as'at 
present, in accordance with the class of land and other factors. 
They will in some cases be higher than the average rate* In 
other cases they will be lower* 

(3) The revenue rate as finally announced for a particular 
square will represent the maximum which Government can take 
in any circumstances during the period of 40 years. 

(4) Government will not take these maxima rates unless the 
general level of prices is at least as high as that represented by 
the prices given in the Schedule attached.^ 

(5) If in any year the general level is higher than that 
represented by the Schedule, the revenue payers will be given the 
full advantage of the excess* 

(6) If in any year the general level of prices is lower than 
that represented by the Schedule, a remission in the revenue 
rates will be given the following year proportionate to the 
difference*’’ 

Thus while the Government was “ bound not to exceed the 
maximum rates as fixed ” they would give to the revenue payer 
the full benefit of t he fall in prices, however great that may be.” 

1. Land Revenue Committee Report, op. cit., p. 40. 

2. Commutation prices based on 20 years* average before the Settlement. 



LAND REVENUE POLICY 251 

To calculate the amount of remission to be given three 
factors are taken into account : — 

(a) The percentage of the total matured area under each 
important crop. 

(b) The average yield per acre of those crops. 

(c) The commutation price assumed for each of those crops. 

‘‘ By multiplying these figures together/* continues the 
communique, ‘‘ the Government will obtain an index figure. 
They will then calculate a corresponding index figure for the year 
previous to that for which remissions are to be given. Unless 
there are exceptional reasons to the contrary, it will be assumed 
that the percentage of crops remains constant and that the 
average yield per acre is also constant.*’ They will, however, 
take the average prices current during the marketing season of 
the preceding two harvests in specified markets of the districts 
during specified months. ‘‘We will suppose that the standard 
index figure is 1,000 and that the index figure according to the 
new prices is 600. The remission given then will be 40 per cent. 
Each year, a new index will be calculated and the amount 
of remission will depend on the level of prices during the 
previous year.*’^ 

The strongest critic of the sliding scale system was Professor 
Brij Narain. He raised two objections against it : 

(/) That the system takes no account of the costs of cultiva^ 

tion. 

(ii) That it is based on not real but “ theoretical or paper 
net assets.** 

“ When prices fall heavily,” writes Prof. Brij Narain, “ and 
costs less heavily it is possible that net assets may wholly vanish. 
But the sliding scale assumes that the zamindar always enjoys net 
assets, provided the fall in prices is not 100 per cent.’*^ 

Prof. Brij Narain, therefore, recommends that “ remissions 
should be granted according to the fall in net assets, not merely 
accordii^ to the difference between commutation and actual 
prices.**^ 

The Punjab Land Revenue Committee recognized this defect 
of the system. They agreed that in a period of falling prices any 


1. Punjab Land Revenue Committee, Appendix A , pp. 157^159, 

2. India Before and Since the Crisis, VoL II, p. 611. 

3. Ibid., p. 6l7. 



252 


ECONOMICS OF INDIA AND PAKISTAN 


remission given in proportion to the fall in an owner cultivator’s 
gross income would not be in proportion to the fall in his net in- 
come, But when prices start rising again,” they added, “ the 
reverse process sets in, and in time, it may be supposed, the two 
tendencies neutralize each other 

The recent enormous rise in prices seems to have vindicated 
this view of the Committee. 

The second objection taken by Prof. Brij Narain was that the 
standard land revenue rates under this system are based on prices 
of 20 years back which were mere paper prices. “ There is little 
or no hope of a rise of prices equal to the commutation level,” 
wrote Prof. Brij Narain. The structure of world supply and 
world demand in regard to agricultural products has fundamen- 
tally altered. Why should not future assessments be based on 
current prices, which are more normal than the absurdly high 
average prices of 1914-1929.”^ He, therefore, recommended that 
assessment should be made on “ actual as distinct from prospec- 
tive assets.”'^ 

“ Referring to Prof. Brij Narain’s contention in his evidence 
that there was no possibility of a period cf high prices returning 
during the next forty years,” the Land Revenue Committee 
added : ‘‘ This assumes a prescience to which we at least can lay 
no claim, and ignores the unhappy possibility of war, which 
might greatly inflate the price of such commodities as wheat and 
cotton.”^ And so it has happened. 

Thus while the commutation price for wheat assumed in the 
Lyallpur Tehsil Settlement was Rs. 3-12-0 per maund, wheat in 
recent years has sold at Rs. 10 or more per maund. This must 
have more than neutralized the over-assessment of the depression 
years. 

Other defects of the sliding scale system were pointed out by 
the Land Revenue Committee. While the system was quite 
popular according to the Committee, it could be improved by 
removing certain defects. The Committee rejected the idea of 
varying the land revenue according to yield as well as prices. 
The idea was attractive but due to practical objection, e.g., 
difficulties of estimating yield annually in each case — the 
Committee did not recommend it. 


1. Report, op. cit„ p, 51, 

2. India Before and Since the Crisis, Vol. II, p. 614. 

3. ibid., p, 617. 

4. Report, op. cit., p. 66. 



LAND REVENUE POLICY 


253 


The system according to the Committee was open to the 
objection that it involved taking a scale of commutation prices 
much above current prices to the confusion of the ordinary 
revenue payer. The Committee sought to meet this objection by 
a system of upper and lower limit for the demand, /.e., by having 
two sets of commutation prices, one based on the whole period 
since the old settlement and the other on the average prices of 
three or five years before the new settlement. The first level of 
prices should be the maximum as now and the second should 
form the basis of actual charge with upper and lower limits with- 
in which no change should be effected. Thus if the upper limit 
was put at 25 per cent and lower at 12| per cent “ there would 
be no remission until prices fell 124 per cent below the lower 
commutation level, and no enhancement until they rose 25 per 
cent above it.'’^ One advantage of this amendment of the 
system would be that small holders who gain little by a rise in 
prices will benefit so long as prices rose only up to 25 per cent. 

Another defect of the system is that it bases remission on 
the prices of the previous year and prices of the year for which 
the revenue is actually being paid may be much lower. The 
Committee suggested that in the case of important crops figures 
of prices of the periods nearest to revenue payment should 
be taken and then “ this average should be increased or reduced 
as the case may be, by the average difference (calculated on 
a twenty- year basis) between the periods and the appropriate 
marketing season.*’^ 

The general conclusion of the Committee regarding the 
Sliding Scale System was that “ it is specially suited to tracts like 
the canal colonies, which have a large surplus produce for sale. 
Such areas are peculiarly susceptible to any sharp rise or fall in 
prices, bene fitting considerably, it may even be enormously, by 
a rise, and suffering correspondingly by a fall. But in areas 
where holdings are very small and farming is consequently of the 
subsistence type, the gain or loss is much less marked ; and if in 
addition harvests are insecure variations may be more important 
in yield than in price. .... It is far from certain therefore 
whether the system will suit the whole province.’*^ 

The Committee recommended that the system being still 1 in 
an experimental stage, it should be reviewed after ten years. We 
endorse this opinion of the Committee. 


1. Report* op. cit., p, 46, 

2. Report, p. 49, 

3; Ibid., p. 110. 



CHAPTER XII 


INDUSTRY 

COTTAGE INDUSTRIES 

1, Introdociion : The problem of Indian industries is 
indeed a vast problem, and in its discussion we must traverse a 
wide and varied field. We shall first acquaint ourselves with the 
present position and the problems of cottage industries. We 
shall study the causes of their survival, the difficulties that they 
have to face and the methods of helping them out of these 
difficulties. Each of the modern large-scale industries with its 
peculiar problems will claim our attention too. We shall go into 
the question of finance and management of the large-scale 
industries and also study some of the factors governing industrial 
development. Industrial labour is a big topic of study by itself. 
Our industrial development being very halting and unbalanced, 
we would like to know how we can accelerate industrial develop- 
ment in Pakistan and remedy the defects of industrial structure 
that have revealed them:elves in recent times. We shall then 
briefly notice the role that the State can play in this connection, . 

2« The Role of SmalLScale Industries in Modern Industrial 
Structure ; We have already seen what a leading position India' 
occupied in the industrial world in the past. The old Indian 
industries were mostly carried on a small scale and belonged to 
the ‘‘cottage ” category. We have also seen that on account of 
some adverse circumstances, the Indian industries which were 
once in a very flourishing state, began to decay. They lost the 
proud position they occupied at one time. They were unable to 
withstand competition from the mass production of big factories*. 

But it is wrong to think that a large-scale industry can kill a 
small-scale industry altogether* The rule that the bigger whale 
swallows the smaller one does not seem to apply here. As Prince 
Kropotkin remarks, “ only a superficial and bookish acquaintance 
with industry could permit the economists to assert that law 
(necessary disappearance of small industry) for half a century 
without attempdng to prove it. The petty trades are not killed, 
and cannot be killed; like ‘Proteas’ they ever change their 
aspect.”^ That the large-scale production enjoys certain advan- 

1 . Quoted by Sahasrabaddhe in a paper read at the Industrial Conference 
in 19 U. 



INDUSTRY 


255 


tages cannot be denied. There are several internal and external 
economies open to them, eg., advantages in buying and selling, 
benefits of specialized labour and machinery, saving in cost 
of advertisement and economy in research. But smalhscale pro- 
duction has advantages of its own. Supervision is very close. 
Master’s eye is everywhere. Waste of material and manpower is 
reduced to the minimum. ' There is no mishandling and spoiling 
of machinery. Costly and elaborate establishment is unnecessary. 
The small-scale producer is in a better position to satisfy the 
whims and tastes of his customers and adapt himself to changing 
conditions. He also has his own “ economies.” The small-scale 
industry is not, therefore, destined to disappear altogether. 

In recent times, small-scale industry has been helped specially 
by some new favourable factors, e.g., the development of cheap 
electric power which can be supplied in small units, growing taste 
of the richer classes for artistic and luxury goods, the growth of 
the co-operative movement and wide diffusion of technical 
knowledge. The establishment of large-scale enterprise itself has 
created new opportunities for the small-scale producer by provid- 
ing him with a work of subsidiary and supplementary nature. 
Besides, industrial ventures are generally started first on a small- 
scale. We thus find siiccessful small industries existing side by 
side with the large-scale Industry. They are not necessarily 
antagonistic. They may be scom^ementgjy rather than competi- 
They may have a sphere of their own not necessarily 
narrow or unprofitable. 

Even in countries which are the classic lands of big business, 
small-scale industry occupies a definite and an important place. 
In France more than ^ per cent of the industrial establishments 
employ less than workers each, and of these the great 
majority employ less than.SO.,^ In Germany 12'6 par cent of the 
total population derived their livelihood from handicraft work. 
Cutlery in Westphalia and watch-making in the Black Forest, 
and making of cheap musical instruments in Saxony and 
Wurttemberg are all carried on a small scale. In the highly 
industrialized city of Birmingham at least 50 per cent of the 
industrial establishments are small scale employing less than 50 
workers.*^ In Japan 53 per cent of industrial population still 
gains its livelihood in small undertakings employing less than five 
workmen.^ In Japan, “ in practically every farmer’s cottage, 

1. Das — Industrial Planning Why and How I 

2. Radha Kamal Mukerjee—Economic Problems of Modern India, 1941, 

pp. 20 ^- 25 . 

3. Hubbard-Eastern Industrialisation and its Effects on the West, 1938, 
114. 



256 


ECONOMICS OF INDIA AND PAKISTAN 


there may he seen small handloom in which the womenfolk 
weave the narrow cotton fabrics from which the Japanese, 
garments are made.”^ About\65 per cent of the total volume of 
Japanese exports comprises the manufactures of medium and 
small enterprises® The toy indiistpy-"of “Japan tsr a small-scale 
industry; In Belgium, Holland and Switzerland several types of 
goods are manufactured on a small scale. In almost every 
country the small-scale industry is alive and kicking^ 

3. Causes of the Survival of the Small-scale Industry in 
India : When large-scale industry has not been able to squeeze 
the small industry out of existence in the countries in advanced 
stage of industrialization, it is not difficult to understand the 
persistence in India of the cottage industries. In spite of 
competition from home and abroad, the cottage "industries in 
India are far from extinct. The causes that account for the 
survival of the cottage industries can be briefly state d, 
and stay-at'home habits of the cottage worker have*keptwm moving 
in the' old gfSlS^'e’.'" •T'hit!' of alternative 

openings has made the worker either unwilling or unable to leave 
his hereditary occupation. p/ the caste system^ Js., re- 

sponsible for the perpetuation of the calste occupation even when, 
it has ceased to be paying. ^Working in one’s own housg'S'ssi’sfed'by 
the loving hands of 'the rhembers of one’s own family and 
^drkihg at bii^r'own will have got their own attractive side. 
The atmosphere is very congenial and it gives him a feeling of 
being a master in a place of business. Even a semblance of 
independence, if not the substance, is not worth throwing away, 
especially when there are long and honourable traditions behind 
a craft. Then agriculture, which is the occupation of about 75 
per cent of our people, affords at best only seasonal employment 
and there is enforced idleness for three or four months in the year 
among agriculturists. There are several supplementary industries 
which can be dovetailed with agriculture. They have, therefore, 
been continued as a “ second string in the bow”. There is still 
in India a large number of people who appreciate and are 
prepared and able to pay for a work of art. T heir patronage has 
arrested the decline of many an old craft. There are certain 
articles, the demand for which is local, fitful or too limited, and they, 
therefore, do not lead to machine production. The ability of the 
cottage worker to introduce an element of variety to suit the tastes of 
different shades, of customers has stood him in good stead and saved 
him frorh destruction. Proximity to market enables him to 

1. A Llarx-— Modern Japan and its Problems, 1928, p. 122. 

2. Bagchx— Industrial Development of Japan, 1939, p. 97* 



industry 


257 


study better the wants of his customers and acquire an intimate 
knowledge as to what would satisfy them best. The isolation of the 
village has not yet been completely broken and many village crafts 
still thrive in places inaccessible to the machine-made goods. 
Some artisans have adapted themselves to the new conditions and . 
have saved their craft by taking adva'nta"ge of new materials or 
new tools. The weaver has taken to the mill-made yarn and the 
flying shuttle, the dyer to the synthetic dyes, the tailor to the 
sewing machine, the brass and copper-smith to the sheet metal 
and blacksmith to the machine-rolled sections. The Indian 
tastes in recent times seem to have veered round to some extent 
and the hand-made goods are- again in favour. The Indian 
sentiment now favours and strengthens the ** buy-Indian 
campaign and the cottage industries have derived some benefit. / 
Mahatma Gandhi lent his powerful support to many tottering ^ 
crafts. The Central and Provincial Governments, too, in recent 
years have given liberal grants for fostering the cottage industries. 
Thus the Pakistanis and the Indians have been one in their 
solicitude for the cottage worker. These are some of the factors 
which explain the wonderful vitality manifested by the cottage 
industries in India and Pakistan. 

4. Present position of Cottage Industries : All cottage 
industries are not in the same position. Their present condition 
varies with the intensity of machine competition which each had 
to face. Some crafts have died altogether. Dacca muslin, for 
instance, will not be heard any longer. There are others in a 
dead-alive condition, e.g., hand-spinning, and there are still 
others like handloom weaving which in recent years have shown 
signs of rejuvenation. India still remains a country of small-scale 
production, from which bulk of the population derive their 
subsistence. The whole of the retail trade is of course a small- 
scale business. Agriculture is carried on a small scale. Besides, 
there are numerous industrial arts and crafts offering employment 
to millions of people in the country. Dr, Radha Kamal Mukerjee 
thinks 14 millions is an underestimate,^ Handloom weaving 
alone employs 5 million people, /.e., equal to the num^t 
employed in all organized industries.*"* There are innumerable 
small factories or workshops dotted all over the country, and in 
Calcutta alone their number is estimated to be more than 10000,' 

Prof. Radha Kamal Mukerjee has given a long list of cottage 
industries which aie still being carried on in different parts of 


1 . 

2 . 

3. 


Economic Problems of Modem India, 1941, p- 26* 

Ibid, p. 25. 

Harold' Butler — ^Problems of Industry in the East, 1938, p. 13. 



258 


ECONOMICS OF -INDIA AND PAKISTAN 


the country*^ To. mention only a few : Basket-making in several 
villages of Jaunpuf, Allahabad and Benares districts, coir-spin- 
ning, wicker work and mat-making in Malabar and Southern and 
Eastern Bengal, silk-worm rearing in Assam, lac and toy manufac- 
ture in Badaunj Meerut, Mirzapur, etc., (U.P.), at Bolpur 
(Bengal), Sylhet (Assam), Chennapatna (Mysore) and Kondapalle 
(Madras), carpet-weaving in Amritsar, Mirzapur and Benares, 
silk-weaving in Murshidabad, Malda, Madura and Bhagalpur, 
conch-shell bangles and mother-of-pearl buttons in Dacca ; artistic 
clay modelling in Mirzapur (U.P.) and Nadia (Bengal) ; lungis and 
sarees at Tinnevelly (Madras) ; glass bangles at Fatehpur and 
Ferozabad (U.P.). Prof. Radha Kamal Mukerjee remarks : 

Every district contains one or more villages where cottage 
production like cloth and silk weaving, woodwork, gold, silver, 
copper, bell-metal, lacquer, bamboos, cane, pith, rattan and 
leather work is carried on to a high standard of artistic excel- 
lence.” Handloom spinning and weaving is carried on all over 
the country, but there are certain centres which have specialized 
in the production of certain articles like leather goods, cutlery, 
embroidery work, etc. Soap-makipg is also being extensively , 
carried on. 

In the Punjab several cottage products have acquired great 
celebrity, e.g., carpets of Multan and Amritsar, sports goods of . 
Sialkot, durries of Ambala, furniture of Kartarpur and Gujrat, 
woollen blankets of Panipat and Kulu, hosiery goods of Ludhiana, 
iron safes' and steel trunks of Gujranwala and Sialkot, locks oE,. 
Rupar, woodwork of Hoshiarpur, tubs and bucket^ of Jullundur 
city, silk material of Amritsar and Jullundur and khes of Jhung 
and Multan, agricultural implements at Batala and Jullundur, . 
cutlery and surgical instruments of Sialkot, Wazirabad, Bhera and 
Lahore, glazed pottery of Multan and Gujrat. 

It is not possible to discuss here all the cottage industries 
mentioned above, although each one of them is being carried on 
very extensively supporting a large number of people. Of these 
the textile group occupies a, specially important place ; we shall 
consider this group in a little detail. , 

: 5; Cotton Handloom Industry : We have already seen what.a 
position of incredible perfection had India attained in the past 
in the matter of making cotton cloth. It has been stated that a 
sample e?:amined by. Dr. Taylor in 1846 came to 250 miles to a . 
pound of staple which, according to modern standards, corre- 
sponds to 5,245 counts. This is. A ^feat which .modern machinery 

1. Vide Economic Problems of Mtxiern India, 1941 pp» 



INDUSTRY 


259 


has yet failed to accomplish. But this position has been lost 
completely. 

The advent of the cotton-mill industry which happens to be 
more vocal and impressive seems to have eclipsed the handloom 
industry and an impression has gone round that the handloom 
industry is in a decadent state or that it is unimportant. This 
impression is undoubtedly wrong. 

In 1938, the handlooms contributed nearly one-third of the 
total cloth produced in the country, the mill production being 
4,269 million yards and the handloom production approximately 
1,916 million yards. According to the Indian Tariff Board, 1932 
(Report, p. 157), the handloom industry supports not less than 10 
million people— a number exceeded only by agriculture. The 
same Tariff Board estimated the number of handlooms in the 
country to be 2,500,000. One centre in Bihar alone produced 
khadi worth Rs. U lakhs. The number of registered weavers in 
the All-India Spinners’ Association in 1938 was 286,000. Cloth 
worth Rs. 50,000,000 is annually produced in the Punjab, Bihar 
and Orissa only. In Bombay 123,893 persons are engaged in 
spinning, sizing and weaving and there are 1,000 weaving centres 
with 80,000 looms. The largest rural centre for weaving is 
Daburhut (Dacca), with 60,000 weavers working 20,000 loom& and 
has been called the Manchester of India.^ In an exhibition 
organized by the Seva Sangh Conference at Malikanda in 
February, 1940, a piece of fine Dacca muslin was exhibited 
which measures 11 yards but weighed only 10 tolas. The con- 
sumption of yarn by the handlooms and the production of cloth 
has been steadily increasing. It has increased from 220 million 
lbs', and 880 million yards respectively in 1900 to 479 million lbs. 
and 1,916 million yards respectively in 1938 ; the improvement 
during the last 15 years has been specially remarkable. The 
handloom industry is thus neither dead nor decaying nor, by any 
means, unimportant. 

The landlooms turn out specialized types of cloth which are 
not suitable for mass production, for it is obviously uneconomical 
to "set up machinery for the manufacture of cloths of elaborate 
designs' for which the demand is limited and fluctuating. 
Further, the hand-made cloth is considered by many to be much 
better than mill-made cloth, for it is thought to be cool in 
%utTxniet, warm in winter, absorbent of perspiration and one that 
' stands washing so well. Cheapness and simplicity of weavers 

1, .Radha Kama! Mukerjee,: Economic Problems of Modem India# 1941i 
PP* 4-6. 



26 U 


ECONOMICS OF. INDIA' AND PAKISTAN 


appliances, conservatism and inertia of the weavers, pleasure of 
working in one’s own home with free and willing assistance of 
the inmates and proximity to the market are some of the other 
factors which are responsible for the survival of the handloom 
industry. 

The Indian National Congress and Mahatma Gandhi in 
particular, through the activities of the AlUndia Spinners’ 
Association, have assisted in the revival of this industry. The 
Government, too, had not lagged behind. In 1934 was inaugu- 
rated a five-year scheme, later extended till 1942, with an annual 
contribution by the Central Government of Rs. 5 lakhs towards 
the expenditure incurred by the Provincial Governments in the 
development of this industry. The activities of the Provincial 
Governments, under the centrally financed schemes, gave a great 
impetus to the industry by the introduction of improved loom 
. and appliances and new and marketable designs, improvement in 
the preparatory and finishing processes, supply of intelligence 
regarding rates of materials and markets, assisting the .marketing 
of the cloth by subsidizing private firms, opening depots, etc. In 
some provinces power-driven warping and sizing machinery wa 
set up. The problems of production, marketing and finance were 
,stimultaneously attacked and as the work was done through the 
agency of co-operative societies, the weavers are supposed to have 
benefited not only economically but also educationally and 
morally. 

No doubt much useful work has been done, but owing to the 
proverbial apathy and conservatism of the Indian weaver, pro- 
gress must needs be very slow. The scattered nature of the 
industry prevents effective organization and the illiteracy and 
appalling poverty of the weavers hamper all kinds of progress. 
.We have hardly touched the fringe of the problems'so far. All 
these efforts, must be considerably intensified if any appreciable 
progress is to be made. The organization of the wea^7ers on the 
factory basis under capitalistic aid and direction might remove 
some of their diflSculties. The sphere of the mills and the hand- 
loom should be statutorily defined and the mills may be forbidden 
to produce cloth below certain counts. Excise duty, with a cor- 
responding increase in the protective duty, may be levied on the 
'mill-made cloth and proceeds utilized to assist the handloorh 
industry. If all possible steps are taken to help the industry and 
' the process of rejuvenation continues, the handloom industry may 
be ’a^red of a respectable place in our economic life. A Fact- 
finding Committee was appointed in 1940 as a preliminary to 
^ taking-further measures for the assistance of the industry. , 



INDUSTRY 


261 


6, Silk iBdinstry The silk industry . in the past was one of 
the flourishing industries of India. India-made silk cloth found 
ready markets abroad. But causes, similar to those affecting the 
cotton handloom industry, viz^, competition from abroad, general 
vitiation of -tastes demanding cheap things, disappearance of the 
native courts and the preference of the new nobility for foreign 
articles and the policy of the British Government and that of the 
East India Company, also adversely affected the Indian silk indus- 
try, Appearance of artificial silk was another nail in its coffin. 

The position of the Indian silk industry is, therefore, far 
from enviable. The Indian silk is being looked down upon even 
in the home market. The reeling is so bad that the home weavers 
prefer to use silk reeled in China and Japan. The Indian silk is 
exported in the waste form so that the reeling may be done 
abroad. Kashmir, Mysore and Bengal are the important centres 
of the industry, and among the chief cities engaged in sitk weav- 
ing may be mentioned Murshidabad, Tanjore, Benares, Surat, 
Amritsar and Madura. The annual Production of Silk has been 
estimated in several provinces as follows : Assam Rs. 1,70,000, 
Bengal Rs. 20 lakhs, Bihar and Orissa Rs. 32 lakhs, C.P. Rs. 14 
lakhs, Mysore Rs. 38 lakhs, Kashmir Rs. 10 lakhs, Jammu Rs* 2 
lakhs, Madras Rs. 5 lakhs and the Punjab Rs. 6,000. 

In recent times the decaying silk industry has attracted the 
attention of the Government and of the patriotic Indians who 
have shown an increasing tendency to patronize home-made 
goods. In 1935 Government set up Imperial Sericultural Com- 
mittee, and on its recommendation grants to the tune of 
Rs. 93,000 were sanctioned for financing schemes calculated to 
produce disease-free seeds and eradicate silk-worm diseases. Also 
an annual grant of Rs. one lakh for five years was given by the 
Central Government in 1935 for the assistance of the industry. 
High import duty on silk and the protection granted in 1934 have 
also been helping the industry. Efforts are being made to dev- 
elop eri-silk industry in Madras, the Punjab and some native 
States like Baroda. As compared with the cotton handloom 
industry, the silk cottage industry should be in a better position 
.to face machine competition, for the silk cloth, being of a very 
fine quality and of great variety, is not so suitable for mass pro- 
duction. . But silk cloth being of the nature of a luxury article, 
its demand must remain limited at home and it would be too 
much to expect it to invade foreign markets in competition with 
Chinese, Japanese and European silk. We are thus constrained 
to arrive at the conclusion- that the Indian silk industry has not 
the same hopeful future as the cotton handloom industry. On 



262 ECONOMICS OF INDIA 'AND PAKISTAN 


account of the World War II, imports from China and Japan 
have ceased and the price of indigenous raw silk has increased by 
75 per cent. 

7, Wool Manufactores : The most important woollen manu- 
factures are shawls, carpets, blankets, felts, puttoos and pashmina. 
At one time all these branches of the woollen industry were 
Quite prosperous, but circumstances- in modern times were not 
favourable to the continued prosperity of this industry as, was. the 
case with so many other Indian industries. 

Shawls of Kashmir were once very famous and commanded 
fabulous prices. The decay of Indian princedoms led to a serious 
contraction, almost an extinction of the home demancL ^ But the 
shawls became quite popular with the Europeans and this arrested 
the decline of the industry to some extent. European demand, 
however, was for distinctly cheaper and therefore inferior shawls. 
This change in the character of demand inevitably led to the 
deterioration of the quality. A severe famirie in Kashmir m the 
early thirties of the last century was a great blow to the industry. 
Franco-Prussian War in 1871 led to ces^tion of me European 
demand, and manufacture of shawls at Paisley, in England, was 
responsible for further worsening of the conditions oi.th^ industry. 
Although the cheap shawls will continue to be made and sold, 
yet it cannot be said that the manufacture of shawls or the old 
excellent quality lias a bright future. 


The carpet industry, too, shared the same fate. It throve 
under the fostering care of the Mogul Emperors. The industry 
shared the fate of the Mogul Empire and it came almost to rely 
on foreign markets in which only cheap carpets could be sol . 
With the use of aniline dyes and with rhe introduction of cheap 
designs under the dictation of foreign markets, all art and quality 
disappeared from the Indian carpet industry. Soon the grip ot 
rhe middleman became stronger and stronger till the carpet 
'weaver lost his economic independence and was thrown entirely 
at the mercy of the dealer. Carpet industry, therefore^ is 
practically dead as a cottage industry and most of th^ .in ism 
carpets* are now made in factories and jaik. Amritsar was.a very 
Important centre of carpet industry. centres of carpe 

-industry are Multan, Bikaner, Mirzapore, Ellore and 

\': ' . the blanket industry has altogether a Wef ul 
'used in blankets is .not of a foe quality and can be had all ?arts 
.of. the country from the Indian sheep, which with 

.everywhere. .This availability, of the raw material i ^ 

the large home market. The weaving art is stdl known to 



INDUSTRY 


263 


millioDrS of people and there is. practically no foreign competition 
in the line. With a little care and attention it should be 
possible to introduce the necessary improvements and put the 
industry on. the road to prosperity. The World War II 
brought the large orders for blankets and gave a fillip to the 
industry. 

8, Hand^made Paper Industry : Another cottage industry 
which has been attracting attention in recent times is paper- 
making by hand. Indians have been conversant for centuries 
with the art of rnaking paper by hand. The oldest paper 
manuscript found in India dates from the first quarter of the 
thirteenth century^ Kashmir was famous for its paper since 
Akbar's time and Sialkot in Pakistan made a fine quality of 
paper called Jehangiri. Sialkot had S3 factories in 1855 employ- 
ing over 9C0 men and yielding an income of about Rs. 60,000.® 
In Ahmedabad too, paper-making was a prosperous trade and 
in 1848, 800 men and boys were daily employed in paper works.^ 

Only thirty years ago,' in Bengal a large class of Muslims 
known as Kaghzis was engaged in the industry in the districts of 
Hooghly, Howrah and Murshidabad. 

Even now in several parts of the country like Kashmir, 
Hyderabad, U.P., C.P., Bombay and Madras and in jails 
throughout India paper is made by hand. But the methods 
employed are most primitive. The quality of the paper made, 
except in Hyderabad and Kashmir, is generally very poor, ‘for 
the paper lacks uniformity in size, .weight, thickness and finish. 
The paper is inefficiently sized and the cost of production is very 
high. . 

Strenuous efforts are now being made to revive this ancient 
and useful art. With this end in view, the industrial section 
of the Indian Museum, Calcutta, has collected about twenty 
samples "of hand-ma'de paper, from Kashmir, Manipur (Assam), 
Ahmedabad and Shan States. A sample from Nepal is said to 
last 1,000 years or more. The All-India Village Industries 
Association has started manufacturing paper from straw, waste- 
paper j j'ute plant refuse and other materials in Bengal, Bihar, 
Bombay, Orissa and elsewhere. Production of hand-made 
paper has -taken \ p by th^ Benares University. The Industrial 
Research Laboratory of the Industries Department, Bengal, is 

K Indian yunitions Handbook, 1919, p. 246. 

2. Monograph on Paper Making and Papieimache in the 
^ Punjab 1 908, pp. 5-6. 

3. ‘ Kirk — Monograph on Paper Making in Bombay Presidency, 1902* p. 2. 



264 ECONOMICS OF INt>IA AND PAKISTAN 

also investigating the possibilities of making paper by hand. At 
the instance of the U.P. Government, the Forest Research 
Institute, Dehra Dun, has undertaken experiments to see how 
this cottage industry can be developed and its methods improved 
It may be suggested that the pulp should be supplied by the* 
paper mills. This will facilitate the resuscitation of this ancient 
industry. 

There is a great scope for this cottage industry. The hand- 
made paper is in good demand in Europe and America. In 
Ohina and Japan large quantities of paper are made by hand. In 
England, too, the most expensive writing and drawing papers are 
made by hand. But if this cottage industry is to occupy its due 
place in India, it will be necessary to overhaul this old industry, 
introduce new methods and organize it on co-operative lines to 
obviate the difficulties relating to finance and marketing. The 
world War II, by creating scarcity of paper, opened out some 
held tor the hand-made paper which is, therefore, now seen in 
the market more frequently, 

9 . The ills of the Cottage Industries and their Remedies ; 

A study of Indian cottage industries reveals that they are not in 
a nappy position, ■ Some of them are dead, others are languish- 
ihg‘ and still others are struggling to keep themselves above 
water: 

The difiiculties that the small industries experience arise- 
from lack pf finance and marketing facilities, high cost of pro- 
dqction and little margin of profit, poverty and indebtedness and 
illiteracy, ignorance and conservatism of the craftsman, A 
comprehensive scheme attacking the problem on all fronts, 
economic and social, is needed. Spread of education, general 
and technical, should fight the conservatism and ignorance of the 
cmT^mn. An ambitious campaign for his economic and social 
npllFt IS ' essential* He should be supplied better and more 
efficient tools on a hire-purchase system and raw material of the ' 
requisite quality at reasonable rates and on easy terms,. New and 
auractive designs should be brought to his notice and peripatetic 
parties should be regularly sent put to guide him and give the 
necessary demonstration. Industrial exhibitions should be more 
frequently hrid so that the products of the cottage industries get 
the necessary publicity and the gulf between the producer and 
the consumer is bridged. Emporiums and marketing depots 
should be set up to relieve the craftsman from the difficult task 
of marketing so that he may concentrate on production only. 
The crux.pf the whole problem is, marketing and finance and the 
salvation of the craftsman seems to lie in co-operation which can 



INDUSTRY 


265 


lift him economically, morally and educationally. Besides provid- 
ing him with the necessary financial assistance and aid in 
marketing, co-operation will give him lessons in self-reliance and 
self-government. Through a vigorous system of research, we 
must raise his technical eificiency to such a pitch that he is always 
ahead of the machine and not behind it as he is now to his utter 
ruin and embarrassment. Cottage workers may be organized into 
guilds. Such guilds are already being set up in Kashmir. The 
committee appointed by the U. P. Government in 1934 made 
very useful recommendations for the development of cottage 
industries. It recommended, inter alia^ the establishment of a 
Marketing and Finance Company with Government assistance, 
with an initial capital of Rs. 5 lakhs. It is suggested that such 
institutions be set up in all provinces. They can go a long way In 
meeting the difficulties of the cottage worker in the matter of 
finance and marketing. 

A very necessary step seems to be the integration of the 
cottage industries with the modern large-scale industries. At the 
present time the cottage industry stands in isolation always 
threatened with competition from home and abroad. A co-ordi- 
nation between the different links of the industrial chain is badly 
needed. The raw materials can be worked in rural areas in small 
and medium-sized units and then brought in a semi-finished state 
in the big urban industrial centres. This is possible in case of 
jute and cotton industries and in the case of so many others. 
Development of hydro-electric power should make it possible to 
establish in the countryside several industries closely connected 
with and based *on agriculture, e.g., flour-milling, sugar-refining, 
fruit preservation, oil crushing, making of soap, paints and 
varnishes and lubricants, tobacco manufacture, leather industry, 
scientific treatment of dairy products, etc. By establishing a net- 
work of small and medium-sized industrial units in the heart of 
agricultural areas, we must industrialize the rural areas. In America 
Henry Ford has established plants in rural areas for the manufac- 
ture of parts of cars. In Germany too, efforts were being made 
before the war to create small industrial towns throughout the 
countryside.^ For the proper integration of the cottage industries 
with the large industries tariffs will have to be adjusted by taking 
into consideration the fair selling price not only of the modern 
mill industry but also the cottage industry. A counterveiling 
excise duty will be necessary to eliminate competition between 
the home mills and the cottage industries. Such a discriminative 
excise duty was imposed on Khandsari sugar and the factory 


1. Guilleband^ — The Economic Recovery of Germany, 1939, p. 230. 



266 ECONOMICS ,^OF INDIA AND PAKISTAN 

made refined Bugat, . This is a'^step in the right direction, ^ This 
schem-e of excise duty should be extended further to embrace' alf 
the main industries and their cottage prototypes, > ' ' 

Special efforts were made by Governments in Europe to 
encourage small industries. The Government of Austria spent 
large sums on the development of small handicrafts. . Watch- 
making industry of Sakony and pencil industry of Bavaria were 
fostered by State, , Holland developed the industry of hand- 
painting the colth. , The Government of Rumania built up a 
successful handloom industry of 12,000 looms. The Government 
of Hungary supplied the craftsmen between 1899 and Isb9 
macnmery valued at 3,762,567 crowns. Similar efforts were made 
in Germany and Italy, The Japanese Government has been always 
paying a special attention to the small industries.^ In India, too, 
since 1935 the Central and the Provincial Governments have been 
spending large amounts of money'for the reVival and development 
of cottage industries. But such eflForts are not cothmensufate with 
the requirements of the cottage industries scatcered throughout 
this sub-continent, * - 

In view of the large number of people depending on our 
cottage industries and the social and economic advantages expect- 
ed from the development of such industries and artistic value of 
their products, a special effort seems to be called for. Even if 
there is a tenfold development of the large-scale-industries, they 
can absorb at best only a^ small fraction of our people. To find 
employment for. our huge man-power and to establish a propet 
balance between agriculture and industry, greater reliance must, 
therefore,* be had on the development of * small industries in our 
villages. It will also .offset the precarious nature of our agriculture. 
Further, conditions for- the development of small industries are 
especially favourable in India* Large factories require large capital 
which we lack; large factories use labour-saving devices but we 
have* a Targe population waiting for employment. Small- and 
scattered holdings in India do not provide a whole-time- employ- 
ment to the rural populaliori, Th’e scope for “the development of 
cottage industries in India is' particularly wide. It is hoped that in 
the post-war India, cottage industries will be given their due place 
in the scheme of industrialization*- 

During World War H the small industries also- received 
Government attention. Official - inquiries were made 4n all 
Provinces and States to see what contribution these industries 
could" make to the. war “ effort. Lists of articles suitable for 
manufacture in cottage industries were prepared and 25 per cent 
of the war requirements were assigned to them and orders 
amounting to Rs. 10 crores were placed with them in 1942-43* 

1. See paper read at the Industrial Conference held in 1912 by Dr. R. K* 
Mukerjee. 



CHAPTER XIII 

LARGE-SCALE ORGANIZED INDUSTRIES 
Cotton Mill Industry 

1, History : Although the first cotton mill in India was 
set up in 1818 in Calcutta, yet the real foundation of the industry 
was laid in Bombay when the mill set up by Bombay Spinning 
and Weaving Company began working in 1854. But in the 
sixties the American Civil War causing high cotton prices created 
trouble for the new industry. Confidence, however, returned in 
the seventies. More mills were started especially in the ' up- 
country centres like Ahmedabad, Sholapur and Nagpur. Several 
improvements were made in machinery, and cloth of greater 
variety began to be manufactured. But spinning still occupied a 
more, important place. The industry again had to face difficulties 
during the decade 1895-1905, on account of' plague, famine, 
imposition of cotton excise duty, a speculative boom in America 
in 1896 raising the price of cotton to an extraordinary pitch, and 
disturbances in China which was India’s chief market. Again 
there was a great depression in 1907. During this period the 
weaving section of the, industry made more rapid progress. In 
the period immediately preceding the World War I, the Indian 
cotton industry was doing, well but the war gave it a special 
impetus due to shrinkage in imports and increase in demand for 
military purposes. The expansion of the industry was, however, 
hampered owing to the difficulty of importing machinery and 
mill stores. But the prosperity of the industry’ was not destined 
■to last. ' 

^ The boom engendered during the war ended in an un- 
precedented depression for the Indian cotton industry and the 
condition "became acute in 1925, The Chinese' had by this time 
developed their own cotton industry and the Indian industry 
jlost its China matket. In, the meantime, Japan hM stolen a 
mnrch on u^ and with her cheap and efficient labour, favourable 
'climate, superior organization — proved a formidable rival. There 
was also a cut-throat competition among the Indian mills them- 
“selves. Bombay, the chief centre of the industry, hkd her own 
difficulrtes m‘ higher wagesi higher local taxation and higher cost 
'of fuel atrd water-power- as we^ll as distance from ■‘the upcountry 



268 


ECONOMICS OF INDIA AND PAKISTAN 


markets and cotton growing areas* Other factors which were 
responsible in deepening the depression were the defective 
organization for the purchase of cotton and for the marketing of 
cloth, lack of system of short-time working, impossibility of 
collective action, over-capitalization, lack of suitable facilities for 
finance, defective machinery, lack of labour-saving devices, etc. 

Measures of relief for the industry seemed to be urgently 
called for. The cotton excise duty was abolished in 1926 and a 
Tariff Board was also appointed which, reporting in 1927, recom- 
mended some measures of assistance but the recommendations 
were only partially accepted by the Government. The condition 
of the industry continued to worsen* Mr* G. S. Hardy, Collector 
of Customs, Calcutta, was asked in 1929 to conduct an inquiry 
which led to the grant of protection to the industry in 1930 
which, however, involved preference for the British piecegoods. 
The industry received further assistance with the rising of 
import duty in 1931 and with the levying of surcharge of 25 per 
cent, by the supplementary Finance Act, 1931. 

The emergency inquiry by the Tariff Board of 1932 increased 
the measure of protection. Before effect was given to the 
recommendations of the Board two pacts were negotiated, (1) 
The Mody-Lees Pact, 1933, guaranteeing protection to Indian 
cloth and preference to the British piecegoods ; and (2) Indo- 
Japanese Pact, 1934 based on a quota system linking the import 
of Japanese cloth and export to Japan of Indian cotton* Subject 
to these two pacts, the Act passed in 1934 gave effect to the 
recommendations of the Tariff Board and 50 per cent* ad valorem 
duty was imposed on non-British piecegoods* The tariff was 
further revised according to the Indo-British Trade Agreenient 
of 1939 which also introduced a quota system, linking the import 
of British cloth (minimum 350 million yards and maximum 500 
million yards) and the export of Indian cotton to England, 
A sHding scale system of Import duties was provided to regulate 
the import quota and a system of penalties and rewards was 
introduced with respect to the export of cotton, penalty if the 
' export was less than the quota, reward if it was more. All these 
arrangements were severely criticized by the business community 
in India as making serious breaches in the system of protection. 

The Indian cotton industry had thus a chequered history and 
had to pass through various vicissitudes, but it has continued to 
grow so that now it can supply almost all requirements for cloth. 
In ,1899-1900, the share of the Indian mills and of import in the 
Indian market was 12 per cent, and 61 per cent* respectively. 
But in 1930 the corresponding figures were 63^6 per cent, and 8 



LARGE-SCALE ORGANIZED INDUSTRIES 


269 


per cent.- respectively. So the tables have been completely 
turned. The industry occupies a position of unique importance 
in the country. Nearly 100 crores of rupees worth capital is 
invested in the industry and it provides employment for nearly 
half a million workers and their families ; and if we take into 
account the number of people engaged in cultivation and distri- 
bution of cotton crop and dealers in cloth, it will probably be an 
under-estimate to say that 15 million persons directly or indirect- 
ly depend upon this industry. It consumes more than 50 per 
cent, of the total Indian cotton crop production in a year. It 
occupies a respectable position in the world cotton industry inas- 
much as it stands second in the world so far as the consumption 
of cotton is concerned and fifth in the matter of looms and 
spindles installed. It produces ..14_per cent, of the estimated 
world production of cloth and 13 per cent, of the estimated 
world production of yarn. 

The following figures illustrate the growth of the industry : — 


Year 

No of 

No of 

No. of 

Average No of 

Production of 


Mills 

Spindles 

Looms 

daily workers 

cloth 





employed 

million yd,- 

1876 

47 

1,100,112 

9.139 


67 S (1904-5) 

1900 

193 

4 945,783 

40,124 

1,61,189 

1,164 (1913-14) 

1913 

271 

6,778,895 

104,179 

-2 53,786 

1,970 (1924-251 

1925 

337 

8,510,633 

154.292 

3,67,877 

1,790 (1924-25) 

1940 

388 

10,005,785 

200,076 

4,30,165 

4,2o9 (1940-41) 

1943 

401 

10,130,568 

200,890 

5,02,650 

4.1C9 


2. Some 

Recent 

Tendencies 

in the Indian 

Cotton Mill 


Industry ; Vigorous efforts have recently been made to improve 
the quality of Indian cotton by seed selection, hybridisation and 
the importation of exotics so that the quantity of long-staple 
cotton grown in India now very nearly approaches to what 
our mills require for spinning all their fine yarn. In their efforts 
to go ‘ fine,’ Indian mills have also been using larger quantities of 
foreign cotton but now that they have to pay a duty of one anna 
per pound on all such cotton, this may hamper their efforts 
to produce finer fabrics. The mills have also been using 
^ mixings ’ in recent years to a much greater extent. 

The Tariff Board in 1927 adversely commented upon the 
quality of the Indian mill production* Since then the mills have 
been making serious efforts to improve ^^their output. By the 
increasing use of imported cotton, by the steady improvement of 
the quality of Indian cotton and through the adoption of such 
mechanical aids as better opening, cleaning, high draft system of 
spinning and use of combing machines, the progress in spinning 
finer counts has been accelerated. During one decade 1928-1929 — 



270 ECONOMICS OF INDIA AND' PAlCisf AN 

1938-39, whereas the production of yarn of counts below 20s 
increased by 92. per cent., that above 30s registered an increase 
of 494 per cent. » . ' 

Similarly there has been a marked improvement in the 
quality of cloth produced by Indian mills. In 1927-28, the 
proportion of piecegoods woven from finer counts /.e., above 30$, 
was nearly 10 per cent., whereas in 1938-39, it was 37 per cent. 
Also production of piecegoods shows a wider range and astonish- 
ingly greater degree of diversification. Considerable progress 
has also been made in the production of printers which in course 
of five years 1932-33 to 1937-38, increased by 87 per cent. 
Appreciable improvement has been made in design and style so 
that the India-made cloth is now almost as attractive as the 
imported one. Arno Pearse remarks, “ The range of goods made 
by Indian mills does not stand behind that of the largest mills in 
Europe/’ In an article cqntributed to the Jubilee Number of 
the Capital in 1938, Sir H.JP^ Mody qupjea f^m the report of a 
delegation of experts "uhclef^Rt. TToh’^^ Tom Sha as follows 

‘‘ The class of goods too were a revelation.. , . Many of the 
manufacturing processes were fully equal to European -standard 
and in some cases the variety of yarn spun .and cloth woven, 
dy^.and finished, showed range and variety probably not 
equalled by any individual European concern.’’,. ^ 

Another noticeable, feature of. the industry is the ‘ away- 
ftom-Bombay ’ tendency. The advantages of Bombay Tie in the 
humidity of its climate, trained labour, availability of supervisory 
and technical staff,' more economical purchases of imported 
cotton, -machinery and mill ^stores, lower office expenses and 
better banking facilities. But the centres like Ahmedabad, 
Shoiapur, Nagpur and Cawnpore enjoy greater proximity to raw 
material, nearness to market, closer acquaintance with the need^ 
of the locality, cheap labour and cheap land. ‘ The Ttidian States 
have 'Still greater attraction on account of Iqwet ta:^aition, lax 
labour laws and'^ other facilities offered by the DarBafs’ as free 
land, leans at l6w rates etc. The balance of* advantage ‘^Seem's to 
be against Bombay, and we find increasing decehtt,$H 2 afioia.of the 
industry. The share of Bombay in the nupibef of mills has gone 
down.fromj32*9% in 1919 to 18’6% inj 1937,^ although^! Bombay is 
still the most important single centte [of _the industry; Satura- 
tion point .seems also to have reached in Ahin^d^bad.; We. may^ 
therefore, '.expect the migration of the industry more in „othex 
parts ofhhe country, like Northern Tndia> Bengal and particularly 

'Arno S. Pearse— Cotton Industry of India," 1900, p. '9. 



271 


LARGE-3CALE ORGANIZED INDUSTRIES 

th^ IndiapL States, Still another tendency is for the weav ng side 
of the industry to develop more rapidly than the spinning side. 
Between 1905 an“d 1936, „ whereas the spindles increased by 91/^, 
the looms increased 299%. Efforts have also been made in the 
direction of modernization of plants and improvement of work- 
ing conditions in the mills by the installation of humidification 
plants. 

3 Some Suggestions for Improvement : — ^T'he Indian 
cotton industry has undoubtedly shown great progress and has 
made India almost self-sufficient. But it cannot be said that the 
position of the industry is perfectly stable. Foreign competition 
in the post-war period is bound to affect the industry adversely. 
It is very necessary that during the period of high profits steps 
should be taken to build up reserves and that the profits be not 
frittered away in high dividends, so that the industry can face 
the post-war effects with confidence. 

If the industry is successfully to withstand foreign competi- 
tion and acquire a foothold in foreign markets, it will be 
necessary to apply, like the Japanese, the methods of high 
commerce to the purchase of cotton and to the selling of piece- 
goods. An effective common sales agency is essential. At pre- 
sent when every mill makes its own arrangements, it involves a 
cut-throat competition at home and a feeble front abroad. 

It is necessary to continue making efforts towards improve- 
ment of the quality of the cloth and further diversification of 
the output. There are several specialities which have hardly been 
yet touched/ e.g.,. mechanical and industrial textiles including 
material for wire insulation, special cotton tapes for spindle driv- 
ing, material to cover rollers for sizing yarn, woven felts used in 
paper, industry, etc. Other possible lines are tracing cloth for 
drawing officers, horse- hair cloth for lining suits, special woven 
tapes for curtains and woven fabrics of all kinds from hose pipes 
to pillow cases. 

The 'equipment of cotton mills needs considerable improve- 
ment. Mr. Harold Hill, Technical Expert, Howard and Builough 
Ltd., who visited Indian mills a few years ago, was of the opinion 
that a large amount of plant in Indian mills was in urgent need 
of replacement. According to the standards revealed in the 
Tariff Board inquiry in 1927, quite a large number of the plants 
must ,be pronounced a.s uneconomical. In Japan a ten-year-old 
milL is considered out-of-date, and they have estimated that 
a new-fplant worhs 35 per cent, more economically. But 
most of Indian plants are more than ten years old and need 
replacement. 



272 


ECONOMICS OF INDIA AND PAKISTAN 


Ignorant and otherwise busy directorate, incompetent and 
selfish managing agents in the case of several mills and defective 
financial arrangements which have been described as ‘ fair- 
weather ’ friends, are some of the other weak spots which must 
be eliminated. 

Above all the organization of the industry is very weak. It 
is organized on a strictly individualistic basis, each mill working 
its own arrangements regarding purchase of cotton, machinery 
and mill stores, selling its output and effecting insurance as best as 
it can with the limited resources at its disposal. The Millowners’ 
Associations are mainly concerned with the safeguarding of their 
interests as against labour and representing the view of the indus- 
try to the Government. It has no coercive action over individual 
mills. The Cotton Spinners’ Association of Japan has an absolute 
control over the constituent members and much of the progress 
of the industry in Japan is due to the driving force and direction 
of its organization. In England, too, the industry has been replan- 
ned on a collective basis. The plan prepared by the Joint Com- 
mittee of Cotton Trade Organizations in 1938 was accepted and 
in July 1939 the Spindles Board was armed with fresh powers so 
that the work of purchasing and dismantling redundant and 
obsolete machinery may proceed apace. If our industry also is to 
be rationalized, its organization must be drastically overhauled. 
Continuously functioning, sub-committees on matters like export 
trade, mill finance, labour, purchase of cotton and mill machinery 
and stores may in the meantime be set up. Constant touch must 
be maintained with our Trade Comissioners abroad. It is the 
weakness of the organization which allowed a rationalization 
scheme proposed in 1930 to be shelved. Given a favourable fiscal 
policy, a progressive attitude on the part of the manufacturers and 
patriotic preference of the Indian public for their home-made 
articles, the Indian cotton industry may be assured of a prosperous 
future. 

World War II and the Indian Cotton Industry, — For more 
than a decade preceding the World War II, the Indian cotton 
industry passed through a period of almost unrelieved gloom, and 
the declaration of war brought a ray of hope. The feeling of 
buoyancy was; however, short-lived. Although heavy stocks 
were substantially cleared at remunerative prices, yet the first 
four months were a period of excitement and the purchases were 
merely for speculative purposes and not for consumptions. Prices 
soon fell and there was a setback. The first year of the war did 
not, therefore, spell any prosperity for the industry. But with' 
the commencemont of the second year, signs of pronounced 



LARGE-SCALE ORGANIZED INDUSTRIES 


273 


recovery were visible. Home demand increased^ war orders 
flowed in and inquiries from abroad had a heartening effect. 
The Eastern Group Conference held in October- November, 1940, 
with a view to making the Eastern Groups of the Empire countries 
self-supporting, looked forward to the Indian industry to meet 
their requirements, and up to June, 1942, orders of the value of 
Rs. 120 crores had been executed. The exports of cotton piece- 
goods in 1942-43 were four and a half-times as much as in 193(5-39, 
the pre-war year. There was a keen oversea demand from 
Ceylon, Australia, Africa and the Middle East. There was a 
welcome respite from foreign competition. Japanese imports 
disappeared altogether and import from U. K. also went down 
considerably. The industry seems to have its hands full at 
present, and it has made some new innovations, e.g., the cotton- 
jute fabric and fivefold yarn. The civilian population, however, 
has been feeling the pinch of high prices of cloth. The Price 
Control Orders and cloth rationing are calculated to bring some 
relief to the consuming public. Since 1942-43 the public has 
experienced much more acute shortage of cloth. There has been 
a cloth famine in Bengal. In 1943-44 the cloth available for 
civilian consumption was estimated to be 94% of the peace-time 
supply. There was an abnormal rise in the prices of cloth 
throughout India. 

The war also was not an unmfxed blessing for the industry. 
There were labour troubles, and wages increased and dearness 
allowances had to be sanctioned. It was not easy to import 
machinery, cotton and mill stores so t hat the industry could not 
expand in response to increased demand. Taxation increa^d. 
All this meant a higher cost of production. The conditions 
during World War II were different from what they were during 
the World War 1. India this time was practically self-sufScient in 
the matter of cloth requirements; There was, therefore, a limit to 
the expansion of the home market and cessation of imports could 
not mean much. The only hope lay in the expansion of ovemea 
market but here shipping difficulties stood in the way. 
industry, therefore, came exclusively to rely on war orders. On 
the whole, it may be said that the war ushered in a period of 
comparative prosperity for the Indian cotton industry. It is 
estimated to employ now three lakhs more men and women than 
before the war. 

5. Compaf ison of Cotton and Jnte Industries : The Pakistan 
jute industry presents, in some respects, a marked contrast to the 
cotton-mill industry. In the first placet the jute industry enjoys a 
monopolistic position free' from fear of rivals in the international 



274 


rCDNOOTCS OF INDIA AND FAKISTAN 


markets. The cotton ihdUistr^, on the other hand, is much 
vulnerable and fear of foreign competition always haunts it. 
Secondly, the jute industry is essentially an export industry, depending 
almost exclusively on foreign markets, whereas the export trade 
of the cotton industry is insighificant as compared with the 
home market. Thirdly, the jute industry is highly centralized, being 
confined to one corner of Pakistan, whereas the cotton indus- 
try is more widely spread and is being increasingly decentralized.! 
Fourthly, the management and ownership of tide jute industry is pre^ 
ponderantly in Muslim hands, "while the cotton industry has been- 
financed largely by Indian capital and is managed by Hindus 
Fifthly, ^^the size of an average jute mill is larger than that of an 
average cotton milL Lastly, the jute industry is more efficiently organize, 
ed and has shown greater capacity for a concerted action to 
meet any situation of stress and strain. 

6, History and Present Position of Jute Industry : The jute 
industry, too, was at first a handloom industry, and, in the words 
of Dr. Forbes Royle, “ forms the grand domestic manufacture . . . 
... It pervades all classes and penetrates every household.’’ ' 
Up to 1857, all the gunny bags exported from India were made 
entirely' by hand and exports in 1850-51 were valued at Rs.' 
21,52,782.^ * ' ^ 

The jute industry owes its inception to one George Acland 
who set up the first jute mill at Rishra near Serampore. The 
first power-loom was installed by the Borneo Jute Co. in 1859* 
AVfirst the progress was very slow, and the first mill had to be. 
wound up. But within a few years, the jute mills came to have 
a very prosperous career and, in the words of Wallace, “they- 
simply coined money ” between 1868 and 1873. In the seventies, 
expansion was too rapid, a severe struggle ensued and several 
mills came to grief. By the eighties it had grown to respectable, 
dimensions and had, in 1882, 5,150 looms. Till 1895, the progress 
was very slow, but it has been, very rapid since then., Progress in 
hessian was much more rapid, than in sacking, the looms for the 
former, increased during 1877':1915 by, 2,400%, whereas the 
increase in the latter, was only- 43%^. The World Ward gave a 
great stimulus to the industry. But. in the post-war years, it was. 
not in a happy position, especially since the thirties on account 
of worldwide economic depression. The productive capacity of . 
the industry had exceeded the demand. Voluntary agreements 
were, entered into to curtail production by short-time working 
ind by sealing of looms. Restriefibns on further extensions 

!. Dr. Forbes Royle— The Fibrous Plants of India, lS55,.p. 251. 

1,- Jather and Bcri — Indian Economics, VoL II, p. 42. 



LARGE-SCALE ORGANIZED INDUSTRIES 275 

were also imposed. From 1932 to 1934 the jute mills worked 40 
hours a week. F^estrictions were then gradually removed and 
working hours increased so that in 1937 all the mills regained 
full liberty of action in the matter. But. it was realized that 
optimism was misplaced. The condition of the industry became 
critical and Government had to intervene and issue an ordinance 
for regulating production. Restriction of crop was also contemp- 
lated. In 1939, therefore, a short-time agreement of 45 hours a 
Week with the sealing of 20% hessian looms ' and 7i% sacking 
looms was entered into. Then came the World War II and, in 
view of the war orders and heavy oversea demand, all restrictions 
were withdrawn and the mill^ worked full 60 hours % week. 
Again the demand seemed to have been over-estimated and 
there were shipping difficulties. Therefore short working was 
again resorted to from April 1940 and later the mills closed for a 
week in a month. Only towards the close of 194 Ij 60 hours 
working in a week was restored. 

On the whote jute industry in Bengal has made uninterrupted 
progress. Its original; outturn was only 8 tons a day, and today 
the production is 5,500 tons a day. Exports of raw jute and jute 
manufactures in 1940-41 were 1,169,000 tons valued at Rs. 5,328 
lakhs. The consumption of jute manufactures in India is only 25 
to 30 per cent, of the total production. The progress of the 
industry can be seen from the follpwing figures : — ^ 



No. of 

Authorised 

Persons 

- 


Average 

Mills 

capital 

employed 

Looms 

Spindles 



Rs. Lakhs 

OOO's 

OOO’s 

00i/» 

1879-80 to 1883-84 

21 

270-7 

38-8 

, 5-5 

88 

1914-15 to 1918-19 

73 

1,403-6 

259*3 

39’7 

821*2 

1938-39 

107 

2.682-6 

... 

66’7 

. 1350,4 


Feverish attempts are being made in several countries to di?" 
cover suitable substitutes for jute. In America bags made of five- 
fold paper have been used instead of jute bags. A plant called 
malva grown in Cuba has been found to be quite, promising. Italy 
has discovered a substitute called Jutital, A Japanese chemist 
has perfected a new type of heavy paper.for the manufactime of 
bags. Indo-China wants to use bags made from coconut fibres* 
Ca'toa — a Brazilian substitute — is believed to be much better and 
stronger than Indian jute. Attempts have been made to cultivate 
jute in Ethiopia, Mexico and Turkey and jute substitutes in java, 
America, Indo-China and Belgian Congo. .But these efforts are 
still in the experimental stage. 

The jute industry has derived much benefit from the Indian 
Jute Mills Association which was formed in 1884 to watch over 
and further. the interests , of the industry. But it was only in 



276 


ECONOMICS OF INDIA AND PAKISTAN 


1939 that it became all-inclusive. In 1936 the Indian Central 
Jute Committee was set up and its programme includes marketing 
and transport inquiry, agricultural and technological research, 
seed supply, improvement of jute forecasts and collection and 
dissemination of information of interest to the trade. Agricul- 
tural Research Laboratories and Technological Research Labora-. 
tories have already been set up where spinning trials on the 
various types of the fibre are carried on. The Indian Central 
Jute Committee also tried to find new uses for jute, e.g., a cotton-, 
jute fabric has already been manufactured. But no attempt has 
been made so far to start subsidiary industries and even ordinary 
stores had to be imported. Wat had only helped to conceal 
temporarily the weakness of the industry. Only a radical 
reorganization can set it on a stable footing. Rationalization by 
compulsion seems to be the only permanent solution. Compul- 
sory cartelization is likely to prevent the recurrence of old 
troubles* 

7. The World War II and Jute Industry : The jute industry 
has been passing through ups and downs during the last four 
years. In 1938 there was an acute depression, and balance-sheets 
of 59 compaiiies showed a total Toss of Rs. 84 lakhs. Early in 
1939, a huge sand-bag order created boom conditions followed by 
depression in July 1939. Declaration of war put the industry 
again in a buoyant and optimistic mood. There was a flood of 
war orders,^ production shot up and depression lifted but only 
temporarily to visit again in early 1940. Prices fell and Stocks 
mounted up. Drastic measures to curtail production had to be, 
taken so that ‘improvement set in September 1940. Since then 
the industry has been enjoying a measure of prosperity. In 1942 
the fall of Burma created a panic in Calcutta the main centre of 
the industry. The presence .of the Japanese navy in the Bay qf^ 
Bengal created further difficulties for the jute industry. The 
conquest by Japan of the Far Eastern islands and Malaya deprived 
the jute industry of its running markets and dislocated trade 
with U.S.A. where production of cotton bags was accelerated. 
All these factors led to the accumulation of stocks in Bengal and 
the prices of jute manufactures were depressed. There was 
improvement, however, after September 1942 when the tide of 
war turned in the Allies favour, orders flowed from America and 
from the Government of India. But it cannot be said that it was 
a healthy condition. Only restriction on output has helped it. 
Loss of continental markets and shipping difficulties have stood 


1* Up to June, 1942, orders worth Rs. 31 crores had been received. 



LARGE-SCALE OBGANIZED INDUSTRIES 


277 


in its way in deriving full bienefit from the war. World War I 
proved much more beneficial than the World W'ar 11. 

8. Iron and Steel Industry : Acquaintance of Indians with 
the use and making of iron is said to date from 4000-5000 B.C. 
The Iron Pillar at Delhi, which is considered to be about 1,500 
years old, is a marvel of metallurgical skill. It is admitted that 
not many years ago, making of such a pillar would have been an 
impossibility, and even now there are only a few factories in the 
World which can accomplish such a feat? 

But the manufacture of iron and steel on modern lines and 
on a large scale was taken up only recently. About thirty years 
back the industry had not yet been properly established. Early 
attempts at making iron and steel almost invariably failed on 
account of want of expert preliminary inquiries, inefficient 
management, lack of experience and, above all, owing to the 
difficulty of securing adequate and timely financial assistance. 
Among such attempts may be mentioned those by Messrs. Motle 
and Farquhar in 1779, by Joisah Heath in lb25 and Messrs. 
Mackay and Co., Calcutta, in 1885, and several other attempts 
made in Bengal and Madras. The present Bengal Iron Co. was 
started in 1875 under the name of Barakar Iron Works at Kulti. 
It started manufacturing steel in 1905, but not finding it economic-' 
al, gave it up. The* first, really successful attempt was made by 
the Tata Iron and Steel Co. formed in 1907. Next year was 
formed the Indian Iron and Steel Co. with its works at Hirapur 
near Asansol, and in 1923 were established the Mysore Iron 
Works at Bhadrawati. In 1937 was founded the Steel Corpora- 
tion, of Bengal. 

The Indian iron and steel industry is practically synonymous 
with Tata Iron and Steel Works. It is the largest in the British 
India. The works are ideally situated because the necessary 
raw materials like iron ore or coal are to be found within an 
economic radius. As a matter of fact, there are few instances in 
the world where high quality ore can be landed at so low a price. 
No wonder that India can produce pig iron at the lowest cost in 
the world. 

The World War I gave a great impetus to the iron and steel 
industry. In 1917 big extension plans were prepared which 
could be completed only in 1924. But by that time the industry 
was in throes of acute depression, and the Fiscal Commission 
recommended an immediate inquiry into the conditions of 
industry with a view to granting protection. The Tariff Board 
found that it fully satisfied all the conditions laid down by the 

L Ranade — Essays on Indian Economics, p. 172. 



278 


ECONOMICS OF INDIA AND PAKTISTAN 


Fiscal Commission* Protection was accordingly granted in 1924 
in the form of import duties and bounties* Some measure of 
protection has also to be given to the subsidiary industries lest 
they should be hit hard by the protection given to the main 
industry* In 1927 protection in the form of import duties was 
given for a further period of seven years, but it involved 
imperial preference, for steel of non-British origin was subjected 
to higher duties. Ottawa Agreement necessitated certain changes 
in 1933. On the expiry of the period of protection in 1934, the/ 
protective duties were revised* The industry felt that it could 
do with less protection and before long without any protection 
at all. 


The Indian iron and steel industry has fully justified protec- 
tion granted to it, for during this period of protection it 
has made remarkable process* Productive capacity has been 
enlarged, processes have Been improved and costs have beeh 
lowered.^ The ^ Tata Company’s capital expenditure between 
1929-1939 amounted to 1 \ crores of rupees and an elaborate pro- 
gramme of extensions was planned in 1940 calculated to establish 
a new record of production of steel ingots and finished steel. 
They are now practically self-sufficient in iron and steel. About 
half a million tons of pig iron is annually exported aind the 
quality of their steel is in no way inferior to the contmentsil steel* 
The industry supports about 600,000 men and women workers 
and their dependents and contributes to the tune of' Rs. 647 
crores to the public exchequer. Rs. 25 crores worth of capital is 
invested in the industry. About its vital importance to the 
Indians there cannot be two opinions. For Indian defence it is' 
indispensable. Several other allied industries have grown up and 
many others like the manufacture of locomotives and railway 
wheels are likely to develop. All types of machinery is still 
imported. There is therefore a great scope for expansion. ' 

The production figures given below show the progress of the 
industry: — 


Year 

1914 

1939-40 


Pig Iron 
Tons 
" 162 , 282 ' 
1,837.636 


Steel Ingots Finigh^d Steel 

Tons ^ Tons 

139.433 98,726 

1.070,355 804,.469 


9, Effect of World War II on Iron and Steel Industry; 

Already before the outbreak of the war, the tremendous arma- 
ment drive had produced a boom in the iron and steel industry. 
Tjb^ outbreak of the war raised it to a still higher pitch. An era 


1* Vide memorandum submiujcd by the Tata .Qq, to; the Indian Tariff 
Board in 1933. 



279 


LARGE-SCALE ORGANIZED INDUSTRIES 

u \ ‘ i' ‘ 

Qf unprecedeiite^d. prosperity has begun. Prices, profit and 
production hav^. gqne hi|h* up. Heavy demands from the 
Defence Departm^nt'^nd Railway and expansion of Government 
Ordinance factories Rave kept the iron and steel works feverishly 
active. The cutting off of the important European sources of 
supply increased the calls oti the Indian industry and new exten- 
sions have been rendered necessary at Jamshedpur. Among the 
new manufactures may be mentioned high-speed steels, armoured 
piercing steel, bullet-proof armour plate, wheels, tyres and axles. 
In the domestic market, however, stringency was created by the 
control measures adopted by the Government. 

XO, Paper-Making Industry ; In a country like India where 
the written word is still a mystery to millions of people, the 
paper industry cannot have the same importance as it has else- 
where. The modern paper-making industry owes its origin to 
Dr. William Carey, who about a century ago, set up the first paper 
making machine at Serampore on the river Hooghly. But the 
real beginning was made with the establishment of Royal Paper 
Mill at Bally in 1867. Other mills followed : Upper India 
Cooper Mill, Lucknow (1879) ; the Titaghur Paper Mills near 
Calcutta (1882) ; Deccan Paper Mill Company (1885) ; Bengal 
Paper Mill Company (1889); Imperial Paper ‘Mills (1892 taken 
over by the Titaghur Paper Mills in 1903). Mills set up in the 
post-war, period were Indian Paper Pulp Co. (formed in 1918 and 
commenced operations in 1922)^'^ Carnatic Paper Mills, Rajah- 
mundry (1927) and Punjab Paper Mills at Jagadhri now Sri Gopal 
Paper Mill. More recently a mill has been set up in Assam, a 
paper pulp factory at Chittagong and several other mills were 
started in 1939. In 1942-43 sixteen mills were working to full 
capacity in India. 

In the post-war period, the Indian paper industry suffered 
from foreign competition and was granted protection in 1924 
particularly with a view to developing bamboo as the raw 
material. The results achieved vindicated this policy of protec- 
tion. In 1932 therefore protection was renewed for a further 
period of seven years when imported wood-piilp was subjected to 
a duty of nearly Rs. 45 per ton. Again in 1939 pipotection was 
extended for a fourth period of three years though the import 
duties were lowered. 

As for the raw material, India abounds in different species of 
grasses but on account of these being intermingled with weeds 
and other impurities, their separation is either impo^ible or un- 
economical. Only sabai grass was found to be most suitable. 
But it has now been supplanted by bamboo as the staple raw 



280 


ECONOMICS OF INDIA AND PAKISTAN 


material for the paper industry* Abundant supplies of bamboo 
exist in India where the conditions of exploitation are highly 
favourable. The bamboo-made paper is superior to the grass- 
made paper, for it is singularly free from blemishes and spots and 
it not only possesses initial strength but retains sufEcient durabil- 
ity. Between 1931-32 and 1936-37, the use of bamboo pulp 
increased by 269 per cent., grass pulp 27 per cent, and the irriport- 
ed pulp decreased 45 per cent. India has not yet eixploited her 
vast forest wealth for making paper. In the Himalayas there are- 
vast Stretches of pine spruce and fir. Therefore, production of 
mechanical pulp from Indian wood has a brilliant future. 
Begasse, a by-product of sugar industry, is another raw material, 
the plentiful supplies of which are waiting to be used for paper- 
making purposes. 

Indian mills have been spending large amounts in recent 
years in making additions to and improvements in the equipment 
of their plant. But there are still some important deficiericies. 
Several units are smaller than the pptimum size. Much of the 
machinery is still old, if not obsolete, especially the paper-making 
plant and the plant as a whole is not a balanced one fot the pulp- 
making and paper-making capacities differ. 

There is now a wider range of output and the quality is also 
not inferior to the imported one. The paper now made by the 
Indian mills includes coloured banks and bonds, rag papers, 
embossed covers and writings, blotting paper and packing paper, 
super-calendered tinted printings and.iimitation art and craft. 
They can now make almost every thing ^.except newsprint which 
has to be imported and the requirements of newsprint are rough-’ 
ly 45,000 tons a ’year. Production of all qualities of paper in 
1940-41 to. 1,753,235 cwts. 

The Paper Pulp Section of the Forest Research^ Institute, 
Dehra Duh„ has been carrying on very useful experiments- to« 
further the. development of the paper industry in India. It has 
been demonstrated that a good cheap wrapping paper can be 
made by a mjlxture of indigenous* mechanical wood pulp* and 
chemical grass pulp. Experiments have been made for the 
making of wrapping paper from alia grass- and craft paper from 
chir and pines. There are vast supplies of wood available in 
Kashmir and Tehri Garhwal which are suitable for the manufac- 
ture of newsprint. Proposals are under way for the manufacture 
of this paper. 

There is a fairly large scope for the expansion of the paper- 
making Industry in India. ‘Although^ the Tatiff Board' estimated 



LARGE-SCALE ORGANIZED INDUSTRIES 


281 


the Indian market open to the Indian mills at 50,000 tons, yet as 
the drive against illiteracy gathers momentum demand for paper 
is bound to increase, Indian per capita consumption of paper was 
only 1.2 lbs. in 1938-39, In America it is 240 lbs. The production 
of paper in India has increased from 1,130,000 cwts. in 1939-40 to 
1,821,000 cwts, in 1942-43, 

11. Effect of World War II on Paper Industry : The effect 

of war on the Indian paper industry has been very drastic. 
Extension of war to the Baltic cut off the foreign supplies of 
wood pulp. Imports have practically ceased. Increase in Govern- 
ment activity and other war requirements have increased the 
demand. Mills have been working at their maximum capacity. 
There has been a phenomenal rise in prices and large profits have 
been made. But there is a serious shortage of paper and the 
general public is experiencing great difficulty in satisfying their 
requirements. The mills themselves have to pay abnormally high 
prices for imported stores and chemicals. A conference was held 
in December, 1941, in which maximum prices for paper were 
fixed. In 1942 Government desired to reserve 90% of their 
production for its own use leaving only 10% for the public. In 
1943 the Government reduced its share to 70%. The mills have 
suffered greatly from transport difficulties and coal shortage. 
Severe restrictions were imposed on the use of paper for non- 
essential purposes. The Paper Production Commissioner was given 
wide powers in November 1942 to regulate production of paper, 
its supply and distributiorx. A campaign for the collection of 
waste paper was also started. 

12, Sugar Industry : Gur..making ; India is believed to be 
the original home of sugar. It is said that India manufactured 
and used sugar when the rest of the world even did nor know its 
named 

The sugar industry has indigenous aspect in the gur-making 
industry. Spectacular growth of the white sugar industry seems 
to have eclipsed the gur-making industry but the latter occupies a 
very important place in the economic life. About 70 per cent, of 
the sugarcane grown in the country is utilized in the making of 
gur. The average per capita consumption of gur in India was 
estimated by the Tariff Board in 1938 at 25.8 lbs. and was as high 
as 72.4 lbs. in U, P., while per capita consumption of sugar is only 
7.6 lbs. Production of gur for direct consumption was estimated 
in 1940-41 at 3,410,000 tons. It has been proved by scientific 
analysis that the nutritive value of gur is 30 per cent, higher than 

i. Frinser Grasligs, quoted by Sanghi in paper read ac the industrial 
Conference held in 19i6. 



28^ BGONOMICS OF INDIA AND PAKISTAN 

that of sugar.^ Indian leaders and the Village Industries 
Association have been doing >s. great deal to popularise the con*- 
sumption of gur. But the production of gur is extremely wasteful 
on account of feeble extraction and inefEcient boiling. It is 
necessary to make improvements in the cane-crushing machinery, 
design of furnace and the pans and greater attention should be 
paid to the clarification so that more palatable and presentable 
gur can be placed in the market. 

The World War II created a serious shortage of sugar and 
demand for gur and shakkar consequently became very keen. 
The prices of gur and sugar are now practically equal. This has 
considerably stimulated the production of gur. 

13. History and Present Position of Sugar Industry* As for 
sugar, at one time Indian exports exceeded imports. But compe- 
tition from Java sugar and the bounty-'fed sugar from Europe 
dealt a death-blow to the Indian sugar industry and the area under 
sugar-cane shrank. The stimulus given by the World War 1 afford- 
ed only a t^emporary relief and the few sugar factories that existed 
in India were having only a precarious existence. At the instance 
of the Imperial Council of Agricultural Research, a Tariff Board 
was appointed in 1931 and the industry got protection as recom- 
mended by it for a period of fifteen years expiring on 31st March, 
1946, Its development under the shelter of protective tariff is 
one of the most glorious and romantic chapters in the history of 
industrial development. Its progress was simply astounding and 
this in spite of economic depression, which rather proved benefi- 
cial by making land, machinery and materials available at cheap 
rates. 

Within two years there was 400 per cent, increase in the 
number of factories and §ince 1931-32 production of sugar has 
increased 700 per cent. Area under sugarcane in 1929-30 was 
2,677,000 acres and in 1936-37 it rose to 4,440,000 acres. ‘ There 
was also a sharp decline in imports which up to 1930-31 averaged 
one million tons but in 1936-37 the net imports were only 12,000 
tons nearly. In 1944-45 there were 152 sugar factories and the 
quantity of sugar produced .\yas as under ; — 

Quantity of sugar manufactured from cane 1,100,000 tons 

- Quantity of sugar refined from gur ... ... 10,000 tons 

Quantity of Khandsari production ' ... 100,000 tons 

Total quantity of sugar ... ... 1,210,000 tons 

The estimated consumption in 1943-44 ••• 1,100,000 tons 

1. Vide Harijan dated April 20, 1935. 



LARGE-SCALE ORGANIZED INDUSTRIES 


283 


India is one of the largest producers of sugar in the world and 
the sugar industry in India is only second to the cotton'mill 
industry in importance. About Rs. 30 crores worth of capital is 
invested in the industry and it provides employment to 4,120,000 
men in addition to 3,000 graduates and technical men and 20 
million cultivators. It has stopped an annual drain of Rs. 16 
crores nearly. 

In order to make up for the loss of revenue arising from 
shrinkage of sugar imports and also to check ovenhasty develop- 
ment of the industry under the artificial stimulus of import duty 
and the surcharges on import duty, an excise duty was levied on 
the production of sugar in India in 1934 at the rate of Re, 1-5-0 
per cwt. which now stands at Rs. 3 per cwt. 

In 1937 unrestrained internal competition depressed sugar 
prices to uneconomically low level. A Sugar Syndicate was form- 
ed for regulating sales and production of sugar in India. Accord- 
ing to the Sugar Control Acts passed in U. P. and Bihar, the 
membership of the Syndicate is now compulsory for all mills in 
these provinces. A joint Control Board representing the manu- 
facturers, cultivators and consumers was also set up and in 1940 a 
Sugar Commission was appointed with full powers to control 
prices and production. The Provincial Government also have the 
power to fix minimum prices of cane to ensure a fair return to 
the grower. The Government of India set aside Rs. 7 lakhs for 
the purpose of organizing the cultivators in co-operative societies 
so as to enable them to realize a fair price for cane. All these 
measures were considered necessary to pulf the industry out of the 
critical condition through which the industry was passing in the 
years preceding the declaration of war. 

14, Some Deficiencies in Sugar Industry. There are some 
handicaps and shortcomings from which the Indian sugar industry 
is suffering. The greatest handicap is that the yield of sugarcane 
in India is very low. It is one-third of Cuba, one-sixth of }ava 
and one-seventh of Hawaii. The reason is that the best quality 
sugarcane can be grown only in the tropics, ‘ the lapd of. the 
^ burning sun of the beating rain.' But 90 per cent, of the sugar- 
cane acreage is to be found in the sub-tropical areas, which is 
"really a wheat tract. Further, there is maldistribution of cane 
cultivation, so that there is 'Superfluity round some factories and 
shortage in others. The Sugar Control Acts in U.P, and Binar 
. seek to rectify this situation by introducing the zoning system and 
by. reserving and assigning areas for each factory. Again, the 
price of sugarcane delivered to the factories has ranged between 
4 annas. and3 annas per maund, .which is much higher as compar- 



284 TCONOMICS OF INDIA AND PAKISTAN 

ed with Java where it is about one anna per maund. Improve- 
ment in the standard of cultivation and adequate provision of 
irrigation facilities are necessary to obtain heavier yield per acre. 
Another cause of our high cost of sugar production is the short 
crushing season. Therefore it is also necessary to find "early- 
ripening and late-ripening varieties. Imperial Council of Agricul- 
tural Research, Provincial Departments of Agriculture and Impe- 
rial Cane-breeding Station at Coimbatore are all doing a great deal 
in the matter. The Government of India set aside Rs. 10 lakhs for 
research relating to sugarcane. 

The milling efficiency is also lower than it can be on account 
of the absence of preparatory devices for cane before it is actually 
milled and also the defective size, design and lay-out of the plant 
and uneconomic size of several sugar mills. Most of the mills 
erected in the early period of protection were inadequate in 
capacity and too much cramped to allow expansion and patching 
and adding here and there made the plants unbalanced. 

The location of several mills is unsatisfactory both from the 
point of view of the material and market relations. The U. P. 
and Bihar account for 75 per cent, of the sugar factories and 81 
per cent, of sugar production. In Bombay, consumption of sugar 
is the highest but production is very low ; in Bihar, on the other 
hand, consumption is very low and production is very large and 
in Madras production is small and consumption is very large. 
This involves unnecessary costly haulage. To remedy this defect 
a system of licensing of the factories should be introduced on an 
Indo-Pak basis and future expansion of the industry should be 
properly planned. 

One of the most pressing problems of the sugar industry is 
the one relating to the utilization of by-products. Begasses used 
at present as fuel can be more economically used, for .tne making 
-of paper and paste board. Then, the ever-accumulating quantities 
j^QljLSses are becoming a nuisance to the factories and a danger 
to public health. It can be used as fertilizer, cattle feed, for road 
surfacing and for the manufacture of power alcohol. On the 
recommendation of Joint Power Alcohol Committee, appointed 
by U P and Bihar Governments, necessary legislation in this 
connection has already been passed. With the utilization of by- 
products, price of sugar can be lowered and consumption 
increased. 

- Although the best quality Indian sugar is as good as the best 
imported foreign sugar, yet the average is smaller in grain, not so 
■ pure in colour and lacks in uniformity of crystal size. The review 
of- 1939-40 season showed that the big and the medium grained 



LARGE'-SCALE ORGANIZED INDUSTRIES 285 

sugar lacked brilliatice and contained twists, joint/and mixed 
crystals. 

Another fundamental defect in the structure of the sugar 
industry is the divorce between the agricultural and the manu- 
facturing sides whereas the integration of the two is the normal 
feature in other coiintries. Our factories do not gro’w their own 
Sugarcane and, therefore, to regulate quantity and to improve the 
quality is beyond their control 

Further, unified control which is essential for a complete 
rationalization of the industry is lacking here, and there is no 
compelling force which could scrap obsolete plants and arrange all 
the processes in a manner calculated to eliminate all kinds of 
waste of labour, capital and material 

In India, conditions for the expansion of the sugar industry 
seem to be particularly favourable. She has an abundant supply 
of cane and cheap labour. Her population, being largely vege- 
tarian, constitute a vast market. The present per capita consump- 
tion of 6 7 lbs. is insignificant as compared with 105,8 lbs. m 
Australia, 105.4 lbs. in Great Britain and 94,8 lbs. in U.S.A. 
Even a little raising of the standard of living will open out a large 
field for further expansion. With the resources at its command, 
India can aspire to be one of the biggest exporters of sugar in the 
world. But all the deficiencies mentioned above must be removed, 
the present structure fundamentally altered and industry properly 
planned. The International Sugar Agreement under which she is 
forbidden to export sugar imposes a severe handicap. The point 
of self-sufficiency having been reached, she must now seek outlets 
for our sugar abroad, 

15, Effect of the World War II on Sugar Industry. The 

outbreak of the war did not bring any relief to the industry. 
Prices were • artificially kept up by the Syndicate although the 
stocks were accumulating which meant a heavy strain on the 
industry. When in June, 1940, Government withdrew recogni- 
tion from the Syndicate, centralized control disappeared and 
panic reigned in the sugar markets. The industry had to submit 
to a larger measure of Government control Production was 
restricted and confidence was restored. But restriction of pro- 
duction threatened an agrarian crisis. In 1940-41 the production 
of sugar had exceeded expectation and reduction in output was 
considered necessary. Propaganda among the growers of cane led 
to reduction in area so'wn but it over-shot the mark. An acute 
scarcity ensued in 1941-42. There was sharp upward trend in 
sugar prices. The transport difficulties aggravated the situation 



286 ECONOMICS OF INDIA AND PAKISTAN 

further. A Sugar Control order was promulgated in April 1942 
under which the Sugar Controller for India was given powers to 
control the distribution of sugar in India and to fix prices. The 
order was subjected to severe criticism by the sugar industry. Tn 
1942 there was a drive for increased production. The stocks are 
now being cleared somewhat. On the whole the sugar industry 
had been passing through difficulty in spite of the war, A group 
of sugar factories had been asked to manufacture ambulance 
stretchers in the off-season. 

16 . Leather and Tanning Industry. The leather industry 
occupies a very important place in the national economy of every 
country and it has come to be considered as a ‘ key industry'. 
The leather products are being extensively used in, several other 
industries, e,g., leather bands, roller skins, belting, etc. ‘ 

Pakistan has t|ie reputation''of having a large surplus of hides 
and skins. She “supplies one- third of the total goat skins to the 
tanning industry of, the World. The total, export of raw hides in 
1938-39 was valued at Rs. 3,84,66,560; The normal production of 
ours has been put at 22 'million goat skips, “and 5 mfllion sheep 
skins, 20 million cattle hides and 3,5 million buffalo h^es. The 
Ideal “tanning industry can absorb’ only about 75 per dent, of the 
cattle hides and 50 per cent, of goat and sheep skins hud the rest 
is all exported, ’ - 

. The leather and tanning industry can be broadly classified into 
two sections: The indigenous and the modern. The indigenous 
industry of considerable extent must have existed in India for a 
long time to supply the military requirements of the Indian 
Maharajas and Nawabs. It is even now widely spread in the 
country using locally available tanning materials .and producing 
crude feather to meet mostly the local demand. It is not corifined 
to the depressed classes. * In the Punjab and Bengal the indiistty 
produces bag-tanned buffalo sole leather for shoes and taniied 
sheep skins used for book-binding. Madras and Bombay specialize 
in semi-tanned leather meant almost ' exclusively for export. 
Madras has been the home of Indian tanning industry for a long 
time probably due to the availability of a local shrub Whose bark 
proved to be an excellent tanning material. In 1845 Charles de 
Souza tried to improve the tanning processes there, Lat^r, Madras 
Government took a special interest in the improvement of the 
tanning industry. Sir Alfred Chdttcrton’s efforts in this connec- 
tipn deserve special mention. Discovery of chrome process in 
America and the introduction of machinery led to a decline of the 
Indian tanning industry and the^ hides and skins came- to be 
increasin^y exported-m a raw contiition/ 



: LARGE-SCALE ORGANIZED INDUSTRIES 


287 


In the modem section of the tanning industry are employed 
scientific methods of tanning used in the West, and there is an 
extensive use of mechanical appliances. The Government Harness 
and Saddlery Factory was set up in Cawnpore in 1867, and in 1880 
the Government assisted financially the establishment of the 
Army Boot and Equipment Factory of Messrs. Allen and Cooper. 
Another important factory set up was the Western India Army 
and Equipment Factory in Bombay. Several other factories were 
established. There were in 1938, 14 leather and shoe factories, 
employing 6,736 persons daily, and 32 tanneries, employing daily 
4,522 persons. 

The military requirements have always loomed large before 
the leather industry. Its origin lay in the military necessity. 
During the last war, therefore, the industry received a special 
stimulus and the manufacture of boots and shoes after the war 
was twenty times greater than what it was before. The Indian 
Munitions Board directed its special attention to the develop- 
ment of the leather industry. After the last war 15% export duty 
on hides and skins was levied as a mean to develop the Indian 
tanning industry with a rebate of 10% on export to the countries 
within the Empire so as to foster the industry within the Empire 
as against Germany. But none of these objects was realized. 
The export duty was condemned by the Fiscal Commission as a 
wrong method of granting protection, and tne Indian Taxation 
Enquiry Committee recommended its abolition. The duty was 
reduced to 5% in 1923 and abolished in 1935. In the post-war 
period the Indian tanning industry made a considerable progress. 

The World War II too has given a special incentive to the 
further expansion of the industry. Plants have been modernized 
and ^ extended. There are several big tanneries using the latest 
processes and ‘most modern machinery. Numerous small tan- 
neries have also come into existence. Phenomenal development 
has taken place in chrome tanning for shoe upper leather, box 
and willow sides and box and willow calf from calf skin. The 
manufacture of new lines like leather belting, roller' skins, etc., 
has also been taken up. The tanners have their hands full with 
Government orders. ‘ The industry has taken long strides in 
here in recent years. In view of the fact that there is a vast 
market for shoes in India, that industrial development will 
increase the demand for leather goods for industrial purposes 
and that we have almost unlimited supplies of raw materials, the 
industry has altogether a bright future. The Governments of 
Bombay, Madras and the West Punjab are making vigorous efforts 
in fostering this industry. Tanning centres have been established 



288 


economics' of INDIA AND FAKISTAN 


and peripetatic patties organize instructional classes in rural areas. 
Hide-grading stations have also been set up. All these efforts 
are bound to bear fruit. 

17, Chemical Industries— The chemical industries are of 
vital national importance. Heavy chemical industry is a ‘key’ 
industry par excellence. It is difBcult to think of any important 
industry which does not use chemicals at one stage or another. 
The use of chemicals is essential in textile industries, iron and 
steel industry, paper industry, match industry, leather industry, 
and so on. Therefore, there is not the least doubt of the 
chemical industry being a basic industry. From the military 
point of view, too, chemical industry is indispensable. The im- 
portance of this industry can, therefore, be hardly exaggerated. 

In spite cf the great importance of this industry, Indians 
have made very little progress in this direction* Although 
Messrs. D. Waldie and Co. started manufacturing chemicals in 
India in the middle of the last century, yet the industry in India 
has been established only in the present century. She seems to 
. be fully one century behind. Some progress has been made in 
the manufacture of sulphuric acid, but as for alkalis not much 
has been attempted. Lack of knowledge and trained personnel 
are largely responsible for this slow development. Besides, the 
Indian market has been dominated by powerful foreign combines. 
What little success has attended Indian enterprise in the manu- 
facture of sulphuric acid is mainly due to the fact that there are 
difficulties in importing it. 

During the World War I, production of chemicals was sti- 
mulated to some extent, but no appreciable progress was made. 
In 1928 the question of granting protection to the industry was 
referred to the Tariff Board on whose recommendation protectiop 
was accorded to it in 1931 which was further extended, though thb 
import duties were lowered, up to 31st March 1946. Two recent 
ventures deserve special mention, viz.^ one by Messrs. Tata & 
Sons, and .the second Imperial Caemical Industries, a powerful 
British combine which has taken a lease of Dundot area in the 
Pakistan. In 1938 there was 30 chemical factories employing daily 
4,484 persons. 

The recent war has given a great push to the chemical 
industry. The Government was specially interested itself in its 
development on account of its importance for war purposes. A 
survey of all the possibilities had been undertaken. The Scienti- 
fic and Industrial Research Bureau has been devoting much 
; attention tp the problems of the industry. _ Government plant 



LARGBrSCALE ORGANIZED INDUSTRIES 


289 


has been erected. Manufacture of soda ash, aviation spirit and 
of a large number of drugs and several other chemicals previously 
obtained from abroad has been started, and the manufacture of 
old chemicals like sulphuric acid and sulphate of ammonia has 
been considerably increased. But still the production of chemi- 
cals in India is insignificant as compared with that produced in 
America and some European countries like Germany, 

There are no doubt certain handicaps. We rely on imported 
sulphur, our deposits of sulphur being either inaccessible or not 
capable of economic supply. Deposits of pyrite are also insuf- 
ficient. But otherwise, the chemical resources are fairly adequate. 
According to the Indian Munitions Board, India is well endowed 
for the successful development of chemical industries both as 
regards materials and markets. We have got large supplies of 
alum salts, lime stone, magnesium, and also sulphuric ores. We 
are already producing large quantities of coke from which cola- 
tar can be manufactured. We may, therefore, reasonably hope 
to manufacture successfully various types of acids, alkalies, dis- 
infectants, dyes, vegetable and essential oils, coal-tar, etc. Our 
present dependence for essential chemicals on foreign supplies is 
dangerous and pitiful. In 1940-41 chemical imports amounted 
to Rs. 556 lakhs. Now that cheap electricity for electro-chemical 
products is available here, it is hoped that full use of our vast 
potentialities will be made. 

18* Oil Crushing Industry. Ind ia is the largest producer of 
oilseeds in the world. But it' is a pity that instead of crushing 
the seeds for oil inside the country, large quantities of oilseeds 
are exported abroad, India being the largest exporter of oilseeds 
in the world. This is industrially unsound and economically 
unprofitable. The country not only loses manufacturers’ profits 
but is also deprived of large potential wealth in the form of oil- 
cake which can be used as cattle feed or fertilizer. 

The World War I gave great stimulus to the industry. During 
the war period the average export of linseed oil, groundnut 
oil and castor oil increased by 443%, 150% and 60%, respectively, 
but the export of oil-cake did not register any marked increase. 
The industry has made considerable progress since the last war. 
There are about 500 big oil mills and about 1,000 medium size 
mills in operation for crushing seeds in the various parts of the 
country. The mills cater to the needs of the townspeople and 
manufacture oil for export. In addition to these, the indigenous 
oil mills run by bullocks are working throughout the country. 
Thus immense quantities of oil are manufactured in the country. 



2^0 'ECONOMICS O'E INDIA AND PAKISTAN 

But this oil is full of impurities and has not got a good colour so 
that it can be put to limited uses only^' 

. There ate several handicaps frdm which the Indian oil 
industry suffers. In |he. first plac^, there arc high protective 
tariff walls in other countries against ' oils, whereas the oilseeds 
are admitted free of duty. This encourages . the export of seeds 
from India and discourages the export of oils. Secondly, the 
freight on oils is higher than on oilseeds, whidh makes it more 
economical to export oilseeds. Thirdly, oihcake finds better 
market in Europe than* in India. Very little oil cake is used in 
India as fertilizer and as for its use as cattle feed, Indians have a 
deep-rooted prejudice against oil-cakes, made by machines. They 
think that the cake made by the bullock mill containing more oil 
is more nourishing. Lastly, the export of oil requires special 
shipping facilities, e.g.,. . tanks for bulk export, whereas export of 
seeds does not stand in. the need of any special arrangements. . 

. The World War II having created difficulties in the way of 
exports, afforded great opportunities for the development of the 
oil industry.' Already modern processes and efficient plants are 
being extensively used. It is necessary to extend such improve-/ 
ments still further. Almost unlimited , supplies of the raw 
material are available. Preponderance of agriculture and a huge 
livestock should constitute a vast market for the oil-cake. Oil is ’ 
a. necessary ingredient in the soap, glycetine, lubricant, paint arid ‘ 
varnish industries. Its use is capable of further extensions. But 
if the industry is to be placed on a sound footing, standardization 
of oil and oil-cakes will be essential. Besides, educative' propa- 
ganda will be necessary to persuade the farmer to use oihcake as • 
fertilizer and convince him .that machine-made cake as cattle feed 
is quite wholesome. 

19. tjrlass Industry : Cjlass industry in India is of great ' 
antiquity. It is believed to have • beeh in existence centuries 
before Christ. Pliny testifies to the surperiority of Indian glass, 
and Sir Alfred Chatterton speaks pf the Indian glass industry as 
being an established industry in the sixteenth century. '\Ah . 
ancient branch of the Iridian glass 'industry believed to be more 
than two hundred years old is said to exist at Panipat in the- 
E. Punjab.^ But primitive methods, bad materials and crude pro- 
ducts were the main characteristics of this old industry, 

" ^ The Indian glass industry, as in the case of so many- other 
Indian industries, has two well-defined sides, the indigenous and^ 

/ i, puUetins Indian Industrial Repearph Np. 2, A Survey of Glass 
Industry by E. Dixon, 1936'.^ 



' LARGE-SCALE ORGANIZED INDUSTRIES 


^291 


the modem. The indigenous side of the industry is mainly con- 

* oetned in the making of bangles and Is widely spread throughout 
the country, especially in Bombay and Madras Presidencies. But 
the real home of the cottage industry is in the Indo-Gangctic 
basin with its large supplies of skilled labour, coal and saltpetre, 
mxd there it is concentrated at Etah, Fatehpur and Firozabad, 
especially the latter. Belgaum in the south is another centre. 
At Firozabad there are about 100 regular glass-making factories. 
But more modern tastes and competition from glass factories 
turning out better bangles, especially competition from ‘ silk * 
bangles made in Japan, are hastening the decay of this indigenous 
industry. These tiny factories outside Firozabad are dragging a 

: precarious existence. The World War II, however, arrested the 
decline by affording a welcome respite from foreign competition. 

The modern factory industry dates from the nineties of the 
last century when five factories were set up,* but the attempts 
: proved abortive. In the beginning of the present century up to 
, the outbreak of the 'World War I sixteen more factories were set 
up under the stimulus of Swadeshi sentiment, but with no better 
“ results. These pioneer attempts failed chiefly on account of lack 
. of experienced management and skilled labour, wrong choice of 
. site creating, difficulties in procuring sufficient supplies of some 
essential materials and difficulties of finance. .But the industry, 

. somehow struggled on till the World War I came to its rescue. 
After the war, however, revival .of keen foreign competition 
again put the industry in difficulties. The Tariff Board in 1P32 
. recommended protection for 10 years, but the Government re- 
jected the .claim for protection on the ground that sufficient 
‘ supplies of indigenous raw materials were lacking and that” the 
industry had to rely on imported soda ash. This decision caused- 
bitter disappointment. 

The Wprld War II has helped the industry a great deal. The 
' U. P. Government of late took keen interest in the development 
of the industry. A glass technology section was established in 

• 4938 and a glass technologist was also appointed. The section 
has been doing very useful work. Several new lines required by 
the Defence Department were evolved and handed over to the 
industry for regular production. Under the guidance of the 

. technologist, furnaces were improved, numerous glass shaping, 

' refining and decorating plants installed. Factories with modern 
^ equipment were set up at Ghaziabad, Benares and Firozabad. For 
the use of .the cottage industry at Firozabad, a gass plant was set 
-up-. Technical -iraprovcm.ents of fundamental character were 
effected. Several new lines were initiated, Ci-g., stoppered glass 



292 ECONOMICS OF INDIA AND PAKISTAN 

bottles, glass slides for microscopes, prismatic glass, opal shades 
for use aboard ships, tinted spectacles, etc. The Indian glass 
factories now manufacture lamp chimneys, globes, tumblers, jars, 
flower pots, bottles, sheet glass, electric bulbs, boiler gauges, 
steam ware, hospital ware, etc. Foreign imports were being 
rapidly replaced. Annual production of Indian glass ^ industry 
has been valued at^Rs. 200 lakhs and there are about 100 factories, 
meeting about 50% of the home requirements. Most of the 
Indian glass works are small and there are a few large works too, 
e,g, Allahabad Glass Works at Bahjoi, the Ogale Glass Works in 
Aundh State, Bombay Presidency, and the Paisa Fund Glass 
Works at Talegaon, near Poona. It is the latter that supplied 
trained workers to other glass works throughout India. The 
main centres of the industry are in five provinces — U.P., Bengal, 
Bombay, C P., and the Punjab. 

The glass industry in India should have quite bright pros- 
pects. Indian market for bangles and other glass ware is quite 
vast. One cro’re of rupees worth glass wares were imported in 
1933-34* Sufficient trained personnel is now available. Electricity 
can supply cheap power. Major raw materials in sufficient quan- 
tities are also available, only soda-ash has to be imported. India 
has plentiful supplies of suitable sands scattered in various parts 
of the country, e.g., near Allahabad, in Baroda State, Jodhpur 
State, Jubbulpore and at Jaijon in Hoshiarpur district in E. 
Punjab. Efforts should be made forwards placing the industry on 
a sound and stable footing. 

20, Cement Industry : It is an important ‘ key ’ industry 
and is especially important from the point of view of national 
defence. Its economic importance can be judged from the fact 
that it is one of the best customers for coal and jute industries 
and provides employment to 10,000 workers. 

The Indian cement industry is a fascinating study both from 
the point of view of its phenomenal development and unique 
organization. It is an industry without a past. Though young in' 
years, it has already grown to full stature. From a manufacturing 
capacity of 85,000 tons in 1914-16, it increased its capacity to 
581,000 tons in less than 10 years in 1924 i e., 583'6% increase, and 
the combined capacity of the A.C.C. and Dalmia group of 
factories is now estimated at 2,800,000 tons, /.e., an inepase of 
about 300%, The Indian factories in 1914 satisfied only 6%, of the 
home demand whereas in 1937 the corresponding figure was 97%. 
Few industries in India, except perhaps sugar, can show a record 
of -SO rapid a development. 



LARGE-SCALE ORGANIZED INDUSTRIES 


293 


The first cement factory, which owed its origin to the enter- 
prise of South Industrials Ltd., Madras, commenced operations in 
1904. But its methods being not technically efficient, the factory 
had later to close down. The real foundation of the industry 
was laid in 1912-13, when 3 factories were set up. They had 
hardly commenced operrtions, when the World War I broke out 
and the Government assumed control of production. The 
prosperity of these companies led to the establishment of seven 
more factories^ and the existing factories doubled their capacity 
between 1919-22. As a consequence, productive capacity ex- 
ceeded demand and cut-throat competition ensued, under which 
most of the concerns had to suffer. The Indian Tariff Board in 
1924 refused to recommend protection on the ground that the 
misfortunes of the industry were due to over-production and in- 
ternecine competition. The Board, however, recommended 
bounties on the consignment of cement to certain ports and 
railway stations under certain conditions. This the Government 
refused to accept. 

But the Board’s suggestion to the industry for closer co- 
operation was readily accepted. In 1927, Concrete Association 
of India was formed to carry on propaganda and educate public 
opinion in the use of cement. The Association certainly created 
* cement-mindedness ’ and increased the demand for cement. 
The formation of the Cement Marketing Co., 1930, was the next 
step. It centralized the selling arrangements and assigned quotas 
of production to the various factories. But the system was 
defective inasmuch as most of the factories had to work below 
capacity and even the least efficient ones were kept alive. A 
merger was, therefore, established in 1936 under the name of 
Associated Cement Cos. Ltd* (A.C.C.) But the advent of the 
Dalmia group in 1936 made a breach in the integration of the 
cement industry. Luckily an arrangement was arrived at between 
the two groups and a joint selling organization was set up. The 
cement industry in India is thus strongly organized both on the 
productive and distributive sides, and marked improvements 
have been effected in the technical and commercial aspects of the 
industry. By rationalizing itself the cement industry has given 
an excellent lead to other Indian industries. 

India has become almost self-supporting in cement. Only 
21,000 tons were imported in 1938-39. Establishment of A.C.C, 
factory at Bezwada, extension of their units at Coimbatore and 
the opening of Dalmia factory at Trichinopoly are likely to stop 
even this small quantity imported. 



294 ECbNOMTCS OF INDIA ANB .PAKISTAN 


The location of some of the cement factories in India is not 
quite favourable. Proximity to raw materials is there. But the 
factories are situated far from the coal-fields. The nearest factory 
is at a distance of 200 miles, , and se<>^cral factories are at a 
distance of more than 1000 miles. Nb ceinent works up to 1925 
were situated within 350 miles of Calcutta and 250 miles of 
Bombay, and these two ports and their surroundings consumed 
more than half the cement consumed in the country: Most of 
the cement works were thus seriously handicapped- by their 
remoteness from the chief consuming centres. The Dalmia 
group did not suffer from these defects to the same extent. 

Another predominant feature of the Indian cement industry 
is that its productive capacity has always exceeded the demand or 
the actual output. It: means an unnecessaj-y strain of interest 
charges on the industry and consequently the costs are higher 
th^n they need be. 

Indian market for cement is still largely urtdeveloped. 
London alone consumes more cement than what is consumed by 
the whole of India at pteserit. Till a few years ago’ thb Use of 
cement was confined to heavy structural items of engineering 
construction, but, thanks to the propaganda carried on by the 
Concrete Association, recently more delicate arid everyday uses 
have been found for cement. The cement-made articles are 
invading the office, the workshop, the farm and the market-place. 
The making of these articles will lay down the foundation of a 
new cottage industry. 

The advent of the World War II created ^a confusing 
situation for the cement industry, for opposite influences were at 
work. On account of higher prices and scarcity of steel, higher 
wages, higher cost of other materials, imposition of^Property Tax, 
building activity, practically came to a standstill, s' The local 
authorities and Public Works Departments suspended their 
building programmes. The war, therefore, seriqusly affected the 
demand for cement from the civil population. > But expansion of 
industries and Government requirements, for war, especially ibr 
A.R.P. work, created a new -demand. After the outbreak of 
war the work of military construction was. speeded lup and it 
required large quantities of cement. Also demand appeared 
from fhe oversea markets. Between September- 1939 and 31st 
December 1940, A.C;C. exported overseas* 100,000 fqns of cement. 
In view of' the fact that satiety level has already been reached - so 
far as? home demand, is conterned,^ this new development, i.e., 
expansions of foreign nwhetsy-has-a^ gr^at- significanee for the 



LAftGE-SCA.iE ORGANIZED INDUSTRIES 


295 ; 


future of the Indian cement industry. .On the whole, the 
cement industry has made steady progress during the war period. 
The public has • experienced an .acute shortage of cement. 
Restrictions were imposed on civilian consumptic n. Prices rose 
high. The A.C.C. extended theiis factory at Coimbatore adding 
50% to its productive capacity. 

21. Match Industry : The Indian match industry is of a ’ 
very recent growth. The only successful factory up to 1922 was 
the Gujerat Islam 'Match Factory established at Ahmedabad in 
1895, All other factories started during the pre-war period' had^ 
to be' wound up either on account of financial difficulties or‘ 
ignorance and inexperience of the management or on account of 
wrong choice of the site. . . 

The year 1922 was important in the history of the Indian 
match industry. In that year the import duty on matches was 
raised to Re. 1-8-0 per gross. Although the duty was imposed 
primarily for revenue purposes, it did attord substantial protection 
to the Indian industry, and under its shelter several factories 
were set up. The industry took long stride^ According to the 
Tariff Board in 1928, there were 27 tactories with the productive 
capacity of 85,000 gross. In 1938, there were 88 factories employ- 
ing on average 12,765 persons daily. 

The match industry, finding itself in a difficult position in 
1927, applied for protectiori. But the 'only relief recommended 
by the Tariff Board ij^ 1928 was the conversion cf tne rev^enue 
duty into a protective phe, rhus ensuring its continuity. The 
bewailings of the Indian concerns, however, against the throttlirig 
cbm^titioti of a gigantic Swedish combine working in India, did 
riot receive any sympathetic conkderation. 

The Indian match industry has the advantage of a large home 
market estimated at 17 million gross a year and a plentiful supply 
of cheap and fairly efficient labour.. The industry has also made 
a very rapid progress. Not long ago>, we relied on imported 
matches, but the imparts now are negligible. Imports in 1921-22 
were. .13, 68 millions gross and ia 1938-39 only 1,263,000 gross. 
Production of matches in India in 1940-41 was 23,124,788 gross. 
We are now practically self-sufficient ip . our requirements for 
matches. All this seems to be very satisfactory. 

But the disquieting feature in the Indian match industry is 
the.doiriinance of the all-powerful. Swedish combine controlling 
about ‘ 70% of the world match market. Development of the 
Indian match industry is largely the development of this foreign 
concern. This strong rival of* the Indian concerns jumped over 



296 


ECONOMICS OF INDIA AND PAKISTAN 


the tariff wall and launched an ambitious programme of settingup 
a number of factories in India. In 1928 it had only 4 factories, 
but now about a dozen of them. Even in 19.26 it had captured 
50% of the Indian market. It has since entrenched itself very 
strongly and is proving a great menace to the prosperity of the 
Indian companies. By the adoption of unfair methods, it has 
already taken a toll of many Indian concerns. Its recent recon- 
struction with rupee capital and taking a few dummy Indian 
directors on the board hardly changes the situation. India will 
lose whatever benefit the policy of discriminating protectidn can 
confer, if foreign concerns under the guise of ‘ India Ltd.’ are 
allowed to be started inside the country. 

22, Tea Industry : India enjoys the enviable position of 
being the largest exporter of tea in the world, supplying more 
than 40% of the world demand for tea. Tea industry is an 
important Indo^Pakistan industry with capital investment of 
£100,000,000.^ ' It is a different type of industry, representing a 
combination of agriculture and industry. 

For a long time China tea was supreme in European markets. 
It was in 1820 that indigenous tea was discovered in Assam, and 
the researches of Captain. Jenkins and Lieut. Charlton led to the 
establishment of tea gardens in Assam. The East India Company 
started an experimental garden in 1835 which was sold in 1840 to 
the Assam Co. which even today is the largest concern. Real 
foundation of the industry was laid in the middle of the last 
century, and the industry made a very rapid progress. In 1850 
there was only one estate with 1,876 acres, and by 1936 the 
number had risen to 6,324 estates with an area of 832,800 acres. 
The area under tea in' 1939 was 833,000 acres. Production of tea 
has risen from an average of 201 million lbs. in 1900-1904 to 463 
million lbs. in 1940-41. The Chinese tea was gradually ousted 
from the European markets. Between 1896-97 and 1938-39 exports 
from China decreased by 90% and those from India increased by 
132%. In 1854 the imports of Indian tea into U.K, were only 

500.000 lbs. against 61,500,000 lbs. from China. In 1938 the 
position was completely reversed, the corresponding figures being 

292.524.000 lbs. and 6,962,000 lbs. respectively. Thus ‘‘ in less 
than a hundred years the British Empire had become the tea 
garden and the tea shop of tea. world.” 

. .Cultivation of tea depends solely on climatic conditions. Tea 
gardens are found in Assam, Bengal, Bihar, Southern India and 
Pakistan. But they are largely concentrated in Bengal and 

1. Fluff and Sweeping— an article in the Jubilee Number of . “ Capital, " 
1938i p. 106. . ‘ ■ 



LARGE-SCALE ORGANIZED INDUSTRIES 


297 


Assam, the latter alone in 1938 coittrihuted 57.7% of the tea 
produced in the country. The yield of tea per acre varies from 
province to province, the highest being 728 lbs. per acre in Assam 
and the lowest 44 lbs. in GarhwaL The standard of tea cultivaion 
in Kangra valley is said to be very poor. It Was suggested that the 
Punjab Government should periodically place the services of 
scientific advisers at the disposal of the tea growers in Kangra. 

The domestic market for the tea industry is comparatively 
undeveloped on account of prejudice and poverty. Therefore, 

• the discovery of new foreign markets and the expansion of the 
existing ones is the very life and soul of the tea industry. Eco- 
nomic depression in the thirties hit the tea industry very hard. 
On the one hand, there was over-production in all the tea-grow- 
ing countries and, on the other, policy of aggressive economic 
nationalism resulting in stringent restrictions on imports and the 
lack of foreign exchange cut down the demand. There was a 
catastrophic fall in prices : 1932-33 was the worst year. To save 
the industry from utter ruin, an international agreement was 
entered into in 1933 for five years among the principal tea produc- 
ing countries of the world. The agreement was renewed in 1938 
for the next five years. Under the agreement export quotas 
were assigned to the contracting countries from year to year. The 
Indian export allotment for 1940-41 was fixed at 334,918,624 lbs. 
To push the sales of tea in foreign markets, an International Tea 
Market Expansion Board was established and financed by the 
contracting parties. The Board has succeeded in creating ‘ tea- 
mipdedness * and tea imports into several foreign countries have 
increased substantially. The United Kingdom is our most im- 
portant customer and absorbed, in 1938-39, 87.3% of our exports. 
The U.S.A. and Russia are other promising markets. In 1939-40, 
79% of the tea produced in the country was exported and the 
exports amounted to 4*35 million lbs. valued at Rs. 2,608 lakhs^ 
The exports in 1942-43 were 321 million lbs. nearly and were 
valued at Rs. 3,160 lakhs. The production of tea in 1942-43 
marked a record figure of 564 million lbs. 

But the key to the problems of the tea industry will be found 
in India itself. At present the consumption of tea in India is 
very small, but the teeming millions of India offer almost a 
limitless market. The Indian Tea Market Expansion Board has 
been carrying on publicity campaign by opening tea shops, distri- 
buting free cups of tea, selling' pice packets, through travelling 
cinemas, demonstrations and advertisements in the press. It has 
been trying' to fight the double prejudice, l.e., prejudice against 
tea drinking based on the opinions of quacks and pseudo-medical 



298 


HCONdliilCS'OF INDIA AND PAKISTAN 


men and secondly tSS Belief tBat tea comes ffoili gardens where 
Indians are treated'^^'^orse than slaves. The Board has been try- 
ing to show that 'ffea’^is the best all-round beverage and that it ia 
no longer the ‘‘ Blood of 'the coolie It'has also emphasized the 
Swadeshi character ’ of thh industry. The consumption of tea in 
India has been rapidl'y going up. It ' was only 30 million lbs. in 
1^19-20 ; even as late as 1930-31, it was only 38 million lbs., but • 
in, 1940-41 it was estimated at 106 million lbs. But this ’figure Is 
insignificant as compared with the vast potential market which 
has been estimated at 580 million lbs. a year! It is hoped that 
sustained propaganda will pay in the long run and - the home 
mdrket will - expand . still further. The publicity campaign is 
financed by the industry itself out of the Tea Cess Fund created 
in 1903. The rate, of the cess has ,been raised from time to time ; 
it wasi^ pie pep lb. in 1903‘ and Re. l'-6as. per 100 lbs. in 1939 and 
the amount collected win 1939-40 was Rs. 47,04,000 and fpr pro- 
paganda work ; in India, in 1939-40 Rs..20 lakhs were allotted. 
India’s. contribution for.', propaganda, , abroad in 1939-40 w^s 
£1581000 out of ,a total expenditure of £370,OOQ. ‘ 

, h Thb Indian tea industry has endeavoured', from compara" 
tively early’ time, for' itnprovement of both the quality and yield 
of , yea by scientific feseafch. The Indian Tea Association estab- 
lished in 1911 a resedrch station at Tocklai which has been doing* 
very useful %ork. A commission under F.T. Engledow of Cam- * 
bridge made useful recommendations for intensifying research 
and adding to Its utility to the industry.' A closet contact between - 
the research, station and the management of tea gardens will be* 
highly beneficial. ‘ ' ' - " 

' ' ' . . . ^ - I . . . 

' .The World War II had an unsettling effect on the ted 
industry, the ,continentai;markej:'s disappeared, prices fluctuated ^ 
and export quotas had to be revised. Wh^U J^ipari entered 
war, important sources of supply dike Fprn;iosa:i Chi,na, Japan* and, 
Dutch East Indies were closed to the United ^^ationist The ^ 
demand for Indian tea therefore increased. The war. with its ^ 
strain and fatigue vastly increased the demand for tea from U.K., 
Australia and Middle ' Eastern -countries. ‘The'U.S.Ar alone in- 
creased its’ demand t6 102.5 million lbs. in 1940-4Tas compared ’ 
with^SO milliori IBs. in the preceding year j The Food Ministry ; 
offered purchase '323 million lbs.' Thus the l6ss of Continental ^ 
markets was more thiin made up. Confidence in the iridustry was ^ 
restored and' profits increased. The tea industry ' derived full : 
benefit from the war.' The tea plantations were very near the ’ 

-1 Reports of the Imeperial Economic. Committee 18th _ Report. (Tea),. - 
1931, p. 56. 



LARGE-SCALE ORGANIZED INDUSTRIES 


299 


War zoties and there were also transport difficulties. The tea 
industry therefore got its share of war troubles. 

23. Tobacco Industry India is indebted for tobacco to the 
Portuguese who are believed to have introduce it here in the 
' beginning of the ‘ sixteenth century/ The importance of the 
tobacco indukry in India can be judged from the fact that the 
annual value of the crop has been estimated at Rs. 18 crores. Till 
the separation of Burma, India was the largest producer of tobacco 
and now it is next to U.SA., its area under tobacco in 1938-39 
representing 28 per cent, of the world acreage. 

Tobacco in India is grown in five well-defined areas: (1) 
North Bengal area producing tobacco suitable for cigar, cheroot, 
hooka and chewing ; (2) the Guntur area in Madras growing 
'Virginia cigarette and pipe, tobacco; (3) North Bihar area for 
chewing and cigarettes ; (4) Gujerat area in Bombay and Baroda 
mainly for bidis, Virginia tobacco is also being attempted ; and 
(5) Nipani area consisting of Belgaum and Satara districts of 
: Bombay and some neighbouring States. But besides these special 
tobacco-growing areas, tobacco is extensively grown in all par^ 
of the country for local consumption. Tobacco grown in Indians 
partly manufactured in India and partly exported. The Indian 
.Leaf Tobacco Development Co. is the biggest purchaser and 
accounts for more than half of the total crop. 

' ^ Numerous factories, have been set up during, the last 20*years 
•for manufacturing tobacco. In 1938 there were 30. factories 
‘.employing about 12,000 workers daily. Factories at Bangalore, 
’Calcutta, Saharanpur and Monghyr are quite big. , ^ 

The various^ tobacco manufactures'' include hooka, tobacco 
‘Worth Rs. 9.60 crores, cheroots Rs. 9.20 crores, bidis Rs. 7.52 
' crores, cigarettes Rs. . 5.86 erpres,^ chewing tobacco Rs, 3,02 
crores, snuff Rs. 1.53 crores and cigars Rs. 0.15 crores. The total 
value of the manufactures has been put at Rs. 37 crores nearly, 

- Cigars and cheroots are specialities of Madras, bidis are made in 
almost all principal cities blit Poona, Jubbulpore and Nagpur are 
. the chief centres. It is. a very flourishing cottag^ industry in 
C.P. providing employment for about 50,000 persons. Hooka 
.tpbacGO is. made almost everywhere but Rampur, Gorakhpur, 
Lucknow and Delhi are specially famous for it. 'Delhi and U.P. 
also specialize in chewing tobacco and the Punjab, N.-W.F.P., 
Madras aii4 Mysore in snuff. But there being no standardization, 
the qualities produced in different places differ. 

Imports of tobacco in 1942-43 were valued at Rs. 133 lakhs 
and exportis Rs.' 149 lakhs,- - 



300 ECONOMICS OF INDIA AND PAKISTAN 

Vigorous attempts have been made in recent years in improv- 
ing the quality of tobacco grown in India and for exploring the 
possibilities of growing superior varieties. In 1936 Imperial 
Council of Agricultural Research established a tobacco sub-st^- 
. tion at Guntur and Agricultural Departments in several provinces 
have set up their own research stations. The Indian Leaf Tobacco 
Development Co. itself has done a lot in improving Indian 
tobacco grown in various parts of the country. The Mysore 
Tobacco Co. has stimulated the cultivation of Virginia tobacco 
in Mysore, 

Steps Tave also been taken to improve marketing of tobacco 
in India. Indian Tobacco Association representing the growersj 
, dealers and manufacturers has been established to assist the trade 
in standardizing and preparing the tobacco before marketing. 
The Madras Commercial Crops Markets Act of 1939 seeks to 
regulate marketing practices in tobacco, 

24, Lac Industry ; India produces 40,000 — 50,000 tons of 
lac every year and it is chiefly used for polishing furniture. It is 
^Iso used in grairiophone records, filling hollow gold and silver 
ornaments and for lacquering wooden toys, penholders, etc. But 
for all these purposes India can hardly consume 3 per cent, of the 
total production of lac in the country and the rest is all exported, 
U,S.A. being the most important customer. 

The development of the lac industry has been stimuls^ted by 
the growth of the gramophone record industry which consumes 
about 40 per cent, of the world production of lac. In India 
about 300 tons of lac are consumed by the gramophone record 
> industry. 

Besides gramophone records, lac is utilized in foreign coun- 
tries in the manufacture of French polish, floor varnishes, insulat- 
ing varnishes and cements, grinding wheels, hats, leather, dressings, 
paper- finishes, etc. This shows what a wide field lies open for 
the development of lac industry. We are yet far from making 
full use of this valuable material. The Indian Lac Research In- 
stitute at Namkum in Bihar is doing useful work in suggesting 
new openings for the use of lac and improving its cultivation. 

25. Cinema Industry : Film industry is one of our young- 
est industries. It celebrated its Silver Jubilee in 1939. But it has 
developed very rapidly and already it has come to occupy eighth 
place among the Indian industries. It provided employment 
before the war to about 15,000 persons including 4,000 artistes 
and technicians to whom it pays Rs, 50 lakhs in the form of 
salaries. Its annual contribution to tb^ Central and Provincial 



LARGE-SCAiE ORGANIZED INDUSTRIES 


301 


exchequer amounts to Rs.’ L21 crores, the entertainment tax 
yielding about Rs* 40 lakhs yearly. About the importance of 
the film industry in India, therefore, there cannot be the least 
doubt. 

The first Indian film “ Harish Chandra was produced in 
1913. The advent of the talkies accelerated the development of 
the industry. There are about 150 companies engaged in pro- 
ducing films and there are about 50 studios, the more important 
centres being Bombay, Calcutta, Lahore, Madras and Poona. But 
Bombay accounts for two-thirds of the total number of films 
produced in the country and is, therefore, entitled to be called 
“ India’s Hollywood.” In addition to about 500 touring cinemas, 
there were in 1943, 1460 permanent cinemas. The gross annual 
income from Indian films has been estimated at Rs. 2.40 
crores. Capital investment in the production and distribution of 
films has been put at Rs. 8 crores, the yearly expenditure on 
production of films being 2 crores. The number of distributing 
companies is about 150. 

But so far we have confined our activities to the production 
and distribution of films. For raw films and cinema equipment 
we exclusively rely on foreign countries. In 1939-40 we imported 
raw films valued at Rs. 31 lakhs and cinema equipment worth 
Rs. 8 lakhs. The increasing demand for films in India should open 
out quite a promising field for some enterprising Indian in- 
dustrialists to take to manufacture of raw films and cinema 
equipipent. 

Presiding over the sixth ordinary general meeting of the 
National Studios in January 1946 Mr. J. K. Shroff sounded a note 
of warning to the industry. According to him our studios are too 
smaH, production is haphazard, ill-inconceived and governed by 
personal whims and fancies. In order to ensure ordered growth 
and eliminate wasteful competition, the industry must be properly 
organized. 

26, Silk Industry : The position of silk as a cottage industry 
has already been reviewed. Up to 1830 India used to export 
large quantities of silk goods but we have seen how Indian silk 
goods came gradually to be ousted both from internal and 
external markets. We have also noticed how recently Govern- 
ment tried to help this industry through protection and 
otherwise. 

Besides the cottage industry, silk factories have also been 
set up. But with a few honourable exceptions like Sassoon and 
Alliance Silk Co., Bombay, most of the factories are comparatively 



302 


ECONOMICS OF INDIA AND^ PAKISTAN 


of a very small size working with a 1^'^W’ hundred workm’en. 
There were in 1938, about 100 silk factories employing about 
'6,000 workers daily. These factories ‘ have to rely almost 
exclusively on silk yarn imported from abroad, especially China 
:and Japan. But there are several large tracts in India suitable for 
sericulture. There is no reason why, aided *hy scientific research, 

“ we, should not be able to dispense with the raw silk .and ,silk 
manufactures imported from abroad. India imported in 19404^1 
silk, raw and manufactured, valued, at Rs. 172 lakhs... 

27. Wool Manufactures : Ap^rt from the woollen cottage 
industry, woollen mill industry in India has also been developing 
to some extent. 

The first woollen, mill was set up in 1876 at Cawnpore. 
fewfmills were established in the next decade, the most ^important 
: being the Egerton Woollen Mills a,t Dhariwal. The World War 
I, gave some stimulus to the* industry and .tV^^ filills were set up 
'in Bombay between 1919^21. Severe foreign competition led to 
the liquidation of some mills in 1924*^ Iri tHe thirties the woollen 
industry was in a grip of depression. . Biit the Government could 
not i^ee its way to accepting Tariff Board’s recotamendafion in 
1934 for granting protection t6 th^ industry. Instead a grant of 
Rs. 5 lakhs spread over 5 years was given. for the development of 
the cottage woollen industry. ‘ , ' ‘ ' ^ ' 

There were in? 1937, the latest, year for which/ statistics are ^ 
available, 39 woollen mills with i,958 looms, 68,107, spindles 
and Rs. 100,89,7.39 paid-up capital.. The woollen manufactures 
include' flannels, serges, tweeds, broad clbth, blankets and rugs. 
The mills use largely Indian wool and only for finer fabrics they 
have to .depend on Austfaliah ’ wodl. Bombay, Cawnpore, 
Dhariwal (E,. Bunjab) and, Bangalore. are 'the (jhief centres of the. 
'industry.^ ' ‘ \ f ^ - .vl 

The Indian climate being more suitable for cotton 
, woollen cloth, the possibilities for the expansipri of the WQOuen 
industry are not so wide. But considering large Imports of wool, 
raw and manufactured, valuedrin 1940-41 at Rs. 429’ lakhS, there is 
considerable field for further expansion of the industry. No 
"doubt Indian wool is inferior. butj superior wool cati be imported. 
Several other countries have developed their woollen industry 
with imported wool and there Ismo reasbn why^ this industry 
shopld not be further developed in India. Our mills at present 
satisfy only a fraction of our tOta;l demand* ^ ;i / 

The World.War II gave a great fillip to' the woollen industry. 
The woollen mills in India worked to their m'aximum capacity 



LA®,QEj.§p:Al:E O^pANIZED INDUSTRIES . 3(33 

to meet the clothing requirements of the growing Indian army. 
The in^port of raw^-wpol shot up in 1940-41 from Rs, 75 iakhs 
to Rs. 279 lakhs, which reflects an increased manufacturing 
activity in India. , 

' Eome Other Xndustries : Salt Industry : Salt can be 

manufactured in many parts of India. Only in Bengal, Bihar and 
Orissa it is difficult to manufacture it on account of .damp climate 
and fresh Ganges water poured into the sea. , 

' ‘ There are three sources' of salt in the land. (1) Kock salt from 
salt range and IChewra mines in Pakistan — almost an inexhaustible 
source ; (2) brine salt chiefly from Sambhar Lake in Rajputana ; 
and (3) sea salt factories in Bombay and Madras. Roughly one-- 
half of the indigenous salt is made under Government agency and 
the remainder under licence and excise systems. 

The sdi industry was given protection on the recommenda- 
tion of the Tariff Board in 1930. But there was a cut-throat 
competition between India and Aden salt interests. In 1935 a 
Marketing Board -was set up as recommended by the Tariff 
Board t6 eliminate foreign competition. The salt ; duty was 
continued up to 1938, although it was progressively reduced. * 
Produdtionof salt in Pakistan has, increased in recent years, while 
imports have ceased. In 1930 India imported 688,629 tons and 
in 1937-38 it came down to 347,000 tons. With the resources 
-at her command, India can easily hope to become self-sufficient 
in salt. - 

Ejigineerlng Industries: The engineering industry in India 
came into . existence during the latter half of the last century. 
B^Vit was mainly confined to the repairing activity in connection 
wkh the railwaysl With the development of modern large-scale 
indukry^ workshops' came to be established. Recently the Tata 
Iron and Steel Company stimulated the development of several 
engineering lines so that now several types of tools and 
implements are made Ih India. But even now the engineering 
industry ,is chiefly a repairing industry. India still relies almost 
ej^clusively ori iiripprted machinery which on average comes 
to Rs. 1§ crores worth y^,^rly. To the value of machinery may be 
added "transport, irisiimpce and other charges. All this means a 
considerable initial handicap to the .Indian industrialists. High 
capital cost, scarcity of efficient labour and internal competition 
are s6|me of the , difficulties that the engineering industry has 
to face. ■ 

. . The, engineering industry is centralized in th^ chief industrial 
cenfies, like Bombay, palcutta, Cawnpore, Nagpur, Ahmedabad, 



304 ECONOMICS OF INDIA AND PAICISTAN 

Madras, etc. There were in 1938, 935 engineering works employ- 
ing 143,257 workers daily besides 106 foundries employing 5,513 
workers. 

Paints Industry : The first factory for the manufacture o^^ 
paints was set up in 1902 near Calcutta. This first venturi 
proved to be quite lucky and had a prosperous career. It 
manufactured very high quality paints. No other concern of this 
type was floated for some years. The industry received some 
stimulus during the World War I and since then it has been 
making a steady, though not marked, progress. In 1938 there 
were thirteen paint factories employing 1,616 persons daily.' 
India produces all the essential ingredients required in the 
making of paints, e.g., turpentine, linseed oil, red oxides, barium 
sulphate, etc. Production of paints has appreciably gone up 
during the last few years. In 1937-38 the output. of paints of. all 
types was 516,000 cwts. and in 1940-41 it was 886,666 ,cwts. 

Soap^ Industry : Conditions for the manufacture of soap are ^ 
quite favourable here. Large quantities of .vegetable oils are 
produced in the country -and their supply can be increased still 
further. Only caustic alkalies have to be imported. There is a 
large home market, cheap labour, lower level of taxation and 
existence of import duty on foreign soap-rail these factors go in 
favour of the soap industry.,' The first Indian soap factory on . 
modern lines was started in Meerut in 1879 by N. W. Soap Co. 
Under the influence of Swadeshi movement a number of factories , 
were started in Bengal of which the . Bulbul Soap Co., the 
National Soap Works and Oriental Soap Works deserve special 
mention. Production of soap on the’ eve of War (191^18) was 
only 20,000 tons., The war provided a great stimulus. Between 
1935-39, there was a marked increase in production which 
amounted to, 70,000 tons. Soap of all kinds and of excellent 
quality are being produced, washing soap being 90% of the total 
production. Not only are there small concerns making soap ail 
over the country, but also big companies like Modi Manufacturing 
Company, the Tata Chemical Company, Godrej, arid Lever 
Brothers etc. manufacturing large quantities of good soap. It is 
necessary to develop simultaneously the allied industries like box 
and barrel making. The Indian soap industry has so rnade 
comparatively little use of fats and waste greases which torm 
important materials for the soap industry abroach There were m 
1939, 26 soap factories employing on average' 22,000 persons daily. 
The demand , for soap is increasing, and is bound to increase til 
further as the standard of our living improves. Our ^ap 
industry, therefore, seems to have quite a bright tuture,. ,iue 



LARGE-SCALE ORGANIZED INDUSTRIES 


305 


present estimate of production is 150,000 tons* Rationalization, 
research and improved methods are needed to put the industry 
on a stable basis and open out a vast field for future development. 

30 The World War II and Indian Industry. During the 
first four months of the war there was excitement, speculation 
and uncertainty. Although stocks were substantially cleared, yet 
the prevalent psychological conditions were not such as to be con- 
ducive to any marked improvement in industrial activity. The 
resounding victories won by the German armies — collapse of 
France, invasion of Norway, etc., — were not calculated to create 
favourable conditions for the development of economic activity. 
But the tide turned and by September, 1940, confidence was 
restored. The industrial activity then took a step forward. 
Prices began going up, being 32% higher than the pre-war level in 
March 1941, and they have been going up since then. The prices 
of manufactured articles in March 1943 were 40% above those of 
March, 1942. A rising tempo of industrial activity has been the 
necessary consequence. Production of coal reached a level never 
attained during the last 10 years and that of paper has been the 
highest since 1928-29, Cotton industry has been working double 
shift. During 1942-43, however, there was a marked decline in 
the production of cotton piecegoods, jute manufacturers, paper 
and coal mainly due to shortage of coal and labour troubles. In 
1941 the value of war orders was Rs. 184 crores and in 1942 
Rs. 256 crores. All industries, with the exception of jute and 
sugar, had a prosperous time.^ The index of industrial profit rose 
by 9% between 1939 and 1942. 

Through the impetus given by the war, Indian industry has 
broken new grounds and several new lines are being manufactured 
which were imported before and the production of existing lines 
has been appreciably augmented. Among these we may mention 
chemicals required for sterlization and clarification, bleaching 
powder in a Government plant recently installed, ammonium 
chloride manufactured in a factory in West Pakistan, soda, ash, 
caustic soda, liquid chlorine, hydrogen, medicinal drugs, dressings, 
disinfectants, wooden handles for tooth brushes, liquid glucose 
manufactured by a sugar factory on a large scale, several new types 
of glass manufacture, knive-clasps, bakeiite, etc. Plans are also 
being prepared for the manufacture of aeroplanes, parachutes 
sea-going lighters, etc., manufacture of cigarettes, waterproof 
packing paper, ^ khaki dyes from indigenous materials, buttons 
from cocoanut-shell and several types of rubber goods have also 

1. The effect of war on each individual industry has already been examin- 
ed and reference may be made to the relevant paragraph. 



306 ECbi^OMICS of INDIA-AND PAKIStAN'^ ■ 

received a special fillip.'"' Both ’jithe quality and quantity of' 
rahchine tocds have been ,impfbven. There has been improve- 
ment in the* technique of the "casting and the ^ use of plastics. 
Tyre-making has increased'^ *! ' -n * ' 

During the war, India became the ‘^Arsenal of the Orient”. 
A mission under Sir Alexander^Rqger visited India ih September, 
1'940, to' study the problems relating to the co-ordination of the 
Indian industries to the war supply activities. In October, 1940,^ 
was held the Eastern Group ^Conference which set up the Eastern' 
Group Supply Council — a continuous body to place orders on 
behalf of the countries represented on the Council The activities 
of the Supply Council and those of the Supply Department of 
the Government of Tndia have given a great impetus to the 
Indian industti'es. The Supply Department has been exploring 
the industrial pos^sibilities of the country with very valuable- 
results. A Board of Industrial and Scientific Research has 
been set up and it has' succeeded in' evolving several new proces- 
ses and for commercial exploitation of these processes an Indus- 
trial Research Utiliz£ltion‘ Committee has been formed. All- 
these ' activities have -accelerated industrial development in the 

country* " ■ - . - ^ : 

( . " hip dpubt Indian industries have considerably Benefited from 
reduction in imports, high prices, continuous flow of war orders' 
and increase jn the home demand as the result of the war ; yet it 
has abfo to be born in, mind that the shortage of shipping creating, 
difficulties in the import of machinery, mill stores arid many other 
essential materials and the abnormally high prices at which they 
are iriiported ‘ impose severe handicaps on the Indian industry. 
There was also an acute shortage of coal in 1942-43 which com- 
pelled many factories to remairi idle. But for these handicaps^ 
the industrial progress in India would have been simply astound- 
ing. " It is also worth' noticing that whatever progress has been- 
made, it is largely in industries producing consumption goods and 
war industries. The basic‘6r k:ef'” industries have hardly been- 
touched^ No spectacular or new* industrial developments have 
taken place which are likely tb be permanent. With the suspen- 
sion of hostilities, practically pte-war industrial conditions may be 
restored and we Uxay even lose -same pre-war ground on- account of 
keen competition from abroa:d wheh increased industrial capacity 
outside exerts its full effects. ’’'' ©n *the whole, however., Indian 
and Pakistani iridustrialists have a prosperous time.- 



CHAPTER 'XIV 


SOME FACTORS OF INDUSTRIAL DEVELOPMENT 

1 , The Chief Factors ; Industrial development in a country 
is governed by certain fundamental factors. Their presence or 
absence largely accounts for the fact whether the country is well- 
developed or ill-developed in matters industrial. Improvemejut 
in the efficiency of tfxese factors is a sure way of securing 
industrial advance and their inefficiency is sure to spell stagna- 
tion. 

Some of the chief factors on which the industrial develop- 
ment in a country depends are Men, Money, Materials, Market#, 
Motive Power, Management, and Means of Communication and 
Transportation. 

Men : Man is the most important factor. It is his intel- 
ligence, resourcefulness, prudence and steadiness of character 
'which makes or mars a country. A country is what its people 
make her. Man’s inventiveness, enterprise and industry are called 
forth to bring about an economic uplift - of the country. The 
character of industrial labour in India has an important beating 
on the conditions of industrial development in the country. 
Indian labour is said to be desultory, inefficient and economipally 
“ dear ” in spite of low wages. But India has got a huge map- 
power and it is capable of vast improvement, because its alleged 
inefficiency is due to several preventable causes. In view of the 
special importance of this factor, we propose to devote a separate 
chapter to its discussion. 

Money : Money oils the wheels of industrial machine. Pro- 
duction without capital will be inadequate and ihefficient. Lack 
of adequate finance is partly responsible for retarding industrial 
: growth in the country. Stepping of foreign capital into the gap 
has created several complex problems both economic and political. 
^But there are reasons for shyness of India’s capital. Given favour- 
able conditions, Indian capital has proved to be quite hold. 
The success of Government’s loan operations shows that Indian 
, capital can respond to the call under favourable conditions, 
India’s hoarded wealth is said to be immense. If India’s capital 
resources, are properly mobilized and Indian money market pro- 
perly organized, the needs of Indian industry will be adequately 



308 


ECONOMICS OF INDIA AND PAKISTAN 


met. A separate section is devoted below to the discussion of the 
problems of industrial finance. 

Materials : We have already reviewed the extent of India’s 
agricultural, forest, mineral and animal resources. Their vastness 
and variety will strike any casual student of natural wealth of 
India. They are almost inexhaustible. On this score Indian 
industries should have little to complain. But these resources, in 
many cases, have yet to be properly and adequately exploited for 
the benefit of Indian industries. It may safely be said that there 
is hardly any important raw material that India cannot produce. 
In this respect, therefore we are very happily placed. 

Markets : The huge population of India with its different 
social strata should furnish almost an unlimited market for every 
variety, of manufactured articles. But the pove rty of the masses 
and the low standard of living impose a limit to this potentially 
wide market. The key to the development of Indian market 
lies in improving the standard of agriculture. Only the pros- 
perity of the agricultural section, which constitutes three-quarters 
of our people, can add to the purchasing power of the masses and 
create or augment demand for industrial products. 

Motive Power ; We have already studied the various sources 
of power available in India. We have seen that India’s coa 
resources, the chief source of power, are neither adequate nor 
properly distributed. The quality of Indian coal is poor. But 
this deficiency can be fully made up by the development of 
hydro-electric power of which she has yet hardly developed 3Z 
of the available resources. If this energy is harnessed into the 
service of Indian industry, cheap and efficient power will be 
placed at the disposal of Indian industrialists. 

Management : Much depends on the man at the top. A 
loose screw there will result in wastage of material, uneconomical 
handling of the machinery, misplacing labour and frittering away 
the resources. The management of Indian industry is in the 
hands of the managing agencies, a peculiar system of management 
prevalent in India. Apart from a few black sheep, the managing 
agents in India have furnished ample proof of their efficiency, 
sense of responsibility, adaptability and capacity to learn. They 
now command a varied experience. Managing Agency system is 
discussed below in a separate section. 

Means of Communication and Transportation ; India’s 
total railway mileage of 41,000 at the close of the year 1940-41 
and metalled road surface of 68,000 miles is ludicrously small as 
compared with the developtnent in this direction in advanced 



SOME FACTORS OF INDUSTRIAL DEVELOPMENT 309 


"countries of the world. In this respect India is yet ill-equipped. 
Lack of adequate, cheap and efficient means of communication 
and transportation acts as a serious handicap in the way of 
Indian industries drawing their raw materials and serving their 
markets. The unsympathetic railway rates policy neutralised to 
■some extent the benefit of the existing railway mileage. A 
‘planned system of transport is an important requisite for any 
scheme of economic development. It is hoped this problem will 
receive proper attention in the post-war years. 

2. Small and Middle Size Industries : Finance is the life- 
blood of industry. Adequate finance is absolutely necessary to oil 
the wheels of industrial machine, to ensure its smooth working 
or to prevent its breakdown. 

The problem of Industrial finance may be studied in connec- 
tion with (a) the small-scale and middle-sized industries ; and (b) 
the large-scale or organised industries. 

The small producer requires finance for the purchase of raw 
material, to meet the expenses of production and to bridge the 
gap between production and final disposal of the goods. 

In the rural areas, capital is extremely unorganized and as a 
matter of fact much capital is not available. The village money- 
lender is the one oasis of thrift in the vast desert of extravagance. 
The small producer being poor and unable to offer good security, 
the funds of the money-lender do not flow towards him except 
at exorbitant rates. Every advantage is taken of debtor's 
illiteracy and helplessness."^ Further, in the rural areas, there is 
a greater predilection in favour of investment in land or in 
jewellery or the money is simply hoarded. The co-operative 
banks confine to current agricultural finance and can ill-afford to 
spare any money for local industrial enterprises. The local 
industries, therefore, practically starve for lack of funds or they 
have to pay an unconscionably high rate. 

In the cities, capital is better mobilized. In almost every 
city, there is either a branch of the Imperial Bank or of some 
other joint stock bank. The position has considerably improved 
in the last two-three years, for a large number of banking con- 
cerns have been floated, of which Bharat Bank needs special 
mention. But the requirements of finance in the urban areas, 
both for the cottage worker and the middle-sized industries like 
flour mills, rice mills, printing presses, small match factories, 
hosiery, soap, sports factories, iron and brass factories, etc., are 


1. Report of the Bombay Backing Enquiry Committee, 1931, p. 136* 



310 


ECONOMICS OF JHDIA:aND PAKISTAN 


greater, for their operations are on a larger scale.^ Td afFord 
financial help to the cottage worker, a number of middle-men, 
besides the ordinary sahukar, have appeared on the scene. The 
mahajan gives a cash loan; and if he is also a dealer in raw 
material, he supplies it on credit. The mahajan takes Tull 
advantage of the poverty and isolation of the artisan and charges 
a high price for this accommodation. According to^ the Punjab 
Banking Enquiry Committee, the Punjab weavers' have to pay 
124 ^ to 37%. These rates are certainly too high for the indus- 
tries to bear. The middle-sized industries fare no better. 
Although they are started by men of substance, yet they too often 
need assistance and the indigenous bankers lending on personal 
security, charge high rates. The iron foundries of Ambala and 
Batala have to pay 8i to 15%. The joint stock banks advance 
loans against block to the extent of 20 to 30% of the estimated 
’ value of property and machinery, and against stock to the extent 
of 70%. The Punjab Banking Enquiry Committee found . Gujran- 
wala hardware' industry and Jullundur tanning industry in 
difficulties on account of lack of sufficient capital. The same is 
the experience in every other province. The terms on which 
the banks lend are regarded as inconvenient and irksome., and 
without technical knowledge they do not consider it safe to lend 
to such industries. The view of the Industrial Commission Was, 
“ there is no doubt that the small enterpreneur. . . is hampered 
seriously by the lack of banks and of finance at reasorlable rates.’’^ 
The position even now is not much improved. 

In recent years, the industrial side of the co-operative move- 
ment has been receiving special attention especially since 1935 
when the Government of India sanctioned an annual grant for 
the development of handloom industry. In Bombay in 1938-39, 
there were 42 weavers* societies with Rs. 2,14,930 as working 
capital. In Madras in 1937-38, 133 weavers, societies had Rs. 2,42 
lakhs working capital, U.P., in 1939 had 386 non-agricultural 
societies with Rs. 58,34,398 as working capital, Bengal in. 1938 
had 321 weavers* societies with working capital of Rs, 93,545. 
The Punjab in 1938 had 339 weavers* societies with working 
capital of Rs. 6,37,269 and they advanced money to the extent ot 
Rs. 2,75,386. The co-operative movement has immense possibili- 
ties. In Russia, since the Revolution, the co-operative movement 
has been playing an “ important part in the industrial sphere.’**^ 
But the movement in India is still in its infancy^and it cannot yet 
meet adequately the financial needs of the small industrialist. 


1. Report of the Industrial Commission, 1918, p. 178. ,, 

2. See Blanc — Co-operative Movement in Russia, 1924, p. 168. 



SOME FKCTORS OF-IMDl5$rRIAL DEVELOPMENT 311 ‘ 


"" Another source of - financial ^assistance is the State* The 
State-aid-to-Industrles Acts are in operation in all the provinces* 
But the experience of State loans has not been a happy one, for a 
large number of such loans became frozen and had to be written 
The Government of India lost about Rs. 15,000 out of Rs. 

25.000 advanced to a soap factory*' In Madras out of a total of 
Rs. 8 hkhs advanced -to a paper mill, Rs. 4 lakhs had to be 
Written off There were similar instances in other provinces. A 
Government loan with its elaborate formalities gives unwelcome 
publicity, and industrialists-, who are zealous of their credit, avoid 
the inquisitorial gaze of the Government officials, who, in their 
turn, are not competent to judge the industrial proposition and- 
the credit-worthiness of a party. The Fifth Industries Confer- 
ence held in 1933, which was attended by various provincial 
representatives, rightly came to the conclusion that these loans 
had not been successful in stimulating industrial development to 
any appreciable extent*^ The scheme of direct State assistance, 
therefore, does not seem to hold out any promise* 

Two interesting experiments have been recently made. 
Indi stnal Credit Syndicate, Ltd., was incorporated in Bengal in 
1937,. and Industrial Credit Corporation in U.P., both with an 
authorized capital of Rs. .50 lakhs each. Both have the active 
assistance of the Government. They have been established to 
render financial assistance to small industries. It is hoped that 
other provinces will follow suit. 

5. Financial Requirements of Large-Scale Industry : The 

large-scale industry needs funds for block or capital expenditure, 
i.e,y fot the purchase of land, erection of the factory building, for 
setting up machinery, etc. and in the case of a going concern for 
extensions and replacements. Besides this, funds are required 
for the purchase of materials, for stores, for other expenses' 
incidental to production and marketing and for meeting day-to- 
day requirements of the industry. This is known as the working 
capital. 

From the study of Indian Tariff Board reports, we can find 
estimates pf these requirements in case of various industries. A 
cotton m,ill in Bombay with 1,000 looms and 40,000 spindles 
would require Rs. 4612 lakhs, and the amount of working capital 
would correspond to one-third of year’s works expenditure. A 

60.000 ton cement factory would cost Rs. 48 lakhs and six months’ 
output is a reasonable measure of working capital. The estimate 
for an‘ iron and steel cohcern of a productive capacity of 60,000 

1. Biilletihs of Indian Industries and Labour No. 50, p. 12* 



312 


ECONOMICS OF INDIA AND PAKISTAN 


tons of pig iron and ‘400,000 tons of finished steel has been piit at 
Rs, 15 crores block and Rs. 3i crores working capital. The 
estimate for a paper mill of 6,000 tons capacity is Rs. 49T9 lakhs 
and working capital corresponding to 8 months* output is 
required. For a sugar factory of 400 ton capacity Rs. 10 lakhs 
would be required for plant and Rs. 3*5 lakhs for building and 
working capital equivalent to one-third of the season’s output. 
The initial capital outlay for the tea garden of a minimum size of 
500 acres is estimated at Rs. 7i lakhs. A match factory of the - 
maximum capacity of 10,000 gross boxes per diem will need Rs. 9 
lakhs for the plant and working capital equivalent to four 
months’ output. 

6. Hojv^ much of these requirements should he met 
by ti^e Industry itself; Dr. Jeidels, a foreign banking expert, 
is of the opinion that not only block but also normal working 
capital ha^ to be furnished out of the firm’s own initial capital^ 
But strict adherence to this view will prevent even many sound 
concerns from seeing the light of the day, for it is rare that an 
industrial concern in India has raised sufficient capital for both 
these purposes. In a country where capital is notoriously shy and 
nervous and where hoarding in one form or another is all but 
universal, it is idle to expect that a company will be able to raise 
sufficient funds to meet its lequirements of fixed, floating and 
working capital. The proportion that share capital bears to the 
total capital requirements is 38 per cent, for Bombay, 25 per cent, 
at Ahmedabad and 13 per cent, at Sholapur.*^ The Central 
Banking Enquiry Committee held that the industrial concern 
having raised initial capital sufficient for block, may rely on 
commercial banks for the whole of the workirig capital and also 
temporarily for funds required for extensions.^ This will obviously 
place too much strain on the commercial banks. The sound 
principle seems to be that the concern should raise all the initial 
capital for block plus that amount of working capital which is 
permanently locked up, and for a'riy working capital required over 
and above this, it may rely on the banks to supply it. But this 
sound principle has- been honoured in India more in the breach 
than in the observance, with serious consequences to the investor, 
the industry and the promoters themselves. There are not a 
few cases when the industrial concerns found themselves in 
financial difficulties shortly after start, A paper mill at Rajah- 

1. Dt. Jeidels — Memorandum on Industrial Finance. 

Report of the Indian Central Banking Enquiry Committee, 1931, VoL IV, 
p. 146. 

2. Report of the Textile Labour Enquiry Committee, 1938, p, 51, 

3. Ibid., Voh I, pp, 2?5“, 298-299. ' ’ • 



SOME factors of INDUSTRIAL DEVELOPMENT 313 


mundry, in 1925, could not start operations because it had spent 
all its capital on plant and machinery. The Government had 
once to come to the rescue of the Tata Iron and Steel Company 
by giving a loan of Rs. 50 lakhs. The Indian Wire and Steel 
Products, Jamshedpur, failed to increase its output due to shortage 
of capital and the Government of Bihar and Orissa had to 
sanction, in 1924, a loan of Rs. 5 lakhs. The under^capitalization 
of the Indian industrial concerns is thus chronic and universal. 

7« How Finance is Actually Obtained ; Indian industries raise 
the bulk of their share capital in the form of ordinary shares and 
the tendency in recent years has been to issue them in lower 
denominations. Debentures are not popular with the Indian 
investors and the companies, too, hesitate to issue them for 
rear of losing credit. The various causes that limit the market for 
debentures in India are : heavy legal and stamp charges and 
underwriting commission, heavy transfer fee, limited return, no 
prospect of capital appreciation, frequent failures of industrial 
investments, practice of insurance companies to invest in the 
gilt^edge, etc. The companies cannot raise, therefore, enough 
capital for their normal requirements. 

The inadequacy of the amounts raised through shares and 
debenture capital for entire block and normal working capital, 
compel the industrial concerns to seek the aid of other financing 
agencies. But the perusal of the Banking Enquiry Committee 
Reports and the evidence tendered before them gives one the 
impression that they do not receive any sympathetic treatment 
from the money market. As regards initial capital the facilities 
are inadequate. The public prefer to invest in Government 
Securities and Municipal or Trust loans.^ Thus the paid-up 
capital often does not cover even the block. This makes the 
finances of the company precarious and throws them at the mercy 
of managing agents and other financial houses. A combined 
balance-sheet of 67 cotton mills submitted to the Tariff Board in 
1936 showed that, in 1934, the managing agents in Bombay had to 
find Rs, 10 crores, and in Ahmedabad Rs. 360 lakhs, for the 
balance of fixed capital expenditure and for working capital.^ 
The funds supplied by the managing agents constitute 6 per cent, 
in Bombay, 31 per cent, in Ahmedabad and 15 per cent, in 
Sholapur and at Ahmedabad the managing agents also hold 25 to 
50 per cent, of the shares, and their share in the deposits is nearly 
20 per cent. 


1. Report of the Central Banking Enquiry Coiaiaittce (Majority Report), 
Yoi. L Part L p. 299. 

2, Vide Report, p, 57. 



314 


ECONOMICS OF INDIA AND PAKISTAN 


Tliis brings us to another' source of funds, viz,i deposits, from 
the public. This sy^stem is ^specially prevalent at Ahmedabad. 
But deposits have been described as ‘ fair-weather friend ' and are 
likely to desert at the slightest shock of adversity. Besides, it is 
unsound to finance Schemes of capital expenditure out of these 
short-term deposits. 

Short-term loans on the cash credit system can also be 
obtained from the- commercial banks on the security of stock and 
in some cases on the additional guarantee of managing agents. But 
the cash credit system fails during depression for either the 
amounts are recalled, which leads to forced sales accentuating the 
depression, or the mill-owners are asked to increase the security 
which is not always easy. 

' Apart from these main sources tapped by the cotton mills, 
the various other industries have evolved their own systems of 
finance. The tea companies charge a refundable admission fee of 
Rs. 20—25 per share not bearing any interest and the proceeds are 
spent ot\ initial expenditure. Some of the tea gardens have to, 
borrow from indigenous bankers and loan offices at , a very high 
rate.. The well-established gardens can get accommodation from 
some firrps of brokers who act as intermediaries between them 
and the Imperial Bank and guarantee the loan, the commission 
charged being 1 to 2^ per cent. The Tata Iron &. Steel Co. has 
cash credit arrangements with the Imperial Bank and also raises 
large amounts in the form of one year’s deposits. The Indian coal 
firms have, to borrow from indigenous bankers even at 24 to 30 
per cent. The sugar industry receives deposits from selling 
agents and from the public. The jute industry secures loans 
from the banks on the security of stocks. These are the different 
ways in which the various industries obtain the necessary 
finances.' 

8. Indian* Banks and Industry;-. Conflicting opinions were 
expressed before Central Banking Enquiry Committee about the 
financial assistance given by our banks to industry. But on the 
whole it appears that our banks have been working on too rigid 
and orthodox lines to be of much use to the industry. Their 
unwillingness to advance money on personal security or on the 
security of block, even though unencumbered, and their 
insistence on full backing of tangible and easily realizable security 
detracts from their utility to the industry. Hypothecation of 
stocks on which they generally insist, involving as it does a 
visible coiitrol by the bank, damages the credit of the party and. 
deters them from availing even of the very limited facilities 



SOME FACTORS OF INDUSTRIAL DEVELOPMENT 315 


provided by the banks. ‘Industry in India is face to face with 
banks run on ideal lines’.^ As a matter of fact there is no 
member of our money market whose avowed aim is to help 
industry. The Imperial Bank has its hands full with ordinary 
commercial banking business and there arc not many other 
joint stock banks which by experience and financial strength are 
competent to take up the task of financing the industries. The 
foreign exchange banks are busy in their own sphere and do^not 
feel interested in financing Indian industries. The indigenous 
banks find the financing of trade and ordinary money-lending too 
profitable to turn to industries. Besides, their resources are too 
meagre to be of any substantial aid to industries. The co-orerative 
banks are meant to help the agriculturists. Thus ‘ no banking 
agency cultivates industrial relations’.^ The banks generally 
invest their funds either in Government Securities and give 
advances against merchandise actually deposited in their godowns 
or if kept with the customer, some other legal formalities are 
gone through. None of these practices is helpful to industry 
which is thus starved financially. As the Marwari Chaml^r 
of Commerce pointed out to the Central Banking Enquiry 
Committee, ‘ the sum total of the assistance given by the joint- 
stock banks is an almost negligible quantity.’*^ Mr. Manu 
Subedar, in the minority report, criticized in scathing terms^ the 
treatment accorded to industry by the banks. He observed, the 
hanks have done a disservice to themselves and to industry 
through an exaggerated adherence to the principle of short-term 
investment.” ^ . No doubt, the banks have their own difficulties. 
They have to maintain a condition of maximum liquidity to^ 
meet the demands of their depositors. They also lack the 
necessary knowledge and equipment to determine the timt- 
worthiness of an industrial concern. The industrialists themselves 
are unwilling to disclose fully and unreservedly their state 
of affairs. Floatation of fraudulent concerns and their failure, 
periodic recurrence of depression and precarious position of 
Indian industries owing to the uncertainties of the fiscal policy 
also add to their difficulties. But when all is said the fact 
remains that the bank^ have shown lack of sympathy and an*" 
attitude of unconcern to the development of industries. 
Our'banks must give up this ‘ touch-rtie-not ’ attitude so far as 
industries are concerned. 

1. Indian Ccnaal Banking Enquiry Commitcee (Minority Report), 1931, 

Vol 1, Part 11, p. 333. . . . 

2. Dr Jeideis — Memorandum on Industrial Finance Report or the inaian 
Central Banking Enquiry Committee, 1931, Vol. IV, p. 148. 

3/ ibid.; Vol 56a • * 4 ; * Vide Report, p. 327. 



316 


ECONOMICS OF INDIA AND PAKISTAN 


9 ladiistrlal Finance In some other Countries ; Banks in 
Germany have played an important role in the development of 
industries. Special banking institutions like SchofFhausen, Scher 
Bank, Verein were set up to help industry. Many leading 
German banks known as the ‘ D ’ banks have come to acquire 
vast industrial connections. Having a large share capital of 
long-term deposits and equipped with wide range of technical 
knowledge, the German banks are in the best position to help 
industry. They initiate industrial enterprises and find capital for 
them either by subscribing themselves, hoping to unload later, or 
by underwriting the shares and issuing them to the investing ~ 
public. They nominate their own directors on the boards of 
companies they have helped. To use Dr. Jeidei’s words : ‘ The 
banks attend an industrial undertaking from its birth to its 
death.’’^ But they merely act as intermediaries between the 
industries and the investors, and have no intention of taking up 
the shares permanently. In recent years the German banks 
have been approximating more and more to the English model 
without, however, changing their sympathetic attitude towards 
industry. Sympathetic attitude towards industry is the real 
element in German banking policy. Sometimes the industrial 
firms in Germany combine to form consortia and borrow on their 
collective security.^ The banks in other countries of the 
European Continent follow the same policy. The ‘Big Five’ in 
Belgium, Banques de Credit Mobilier in France, and Societic 
Financiara Italiana and Banco Nationale de Credits in Italy 
have contributed to the prosperity of industry in their respective 
countries. 

In Japan, like India, there was a dearth of capital and 
traditional preference for investment in land. The Japanese 
Government had to make special efforts to mobilize capital and 
turn it into industrial channels. The Industrial Bank of 
Japan was established in 1902. With the approval of the Minister 
of Finance it can issue, underwrite or even subscribe to share 
capital of industrial concerns. It has a committee of experts 
who periodically visit factories and keep it fully informed about 
the condition of industry. It has shown special solicitude 
for small industrialists by helping men of ability and 
excellent business record without any tangible security, A 
Central Chest for Industrial Associations was set up in 1923 with 
50 per cent, capital subscribed by the Government. Even 
ordinary joint stock banks give long-term advances to industrial 

1, Whale, P.B. —Joint Stock Banking in Germany, 1930, p. 52. 

2* Gmlleband—The Economic Recovery of Germany, 1933-38, p. 120. 



SOME FACTORS OF INDUSTRIAL DEVELOPMENT 317 


enterprises and several concerns were rescued by them during 
industrial crisis of 1930 The Industrial Investigation Association 
was recently formed by banks and trust companies to facilitate 
rationalization of Japanese industry. For the financing of new 
enterprises Bank deposits account for 63 per cent., Post 
Offices account for 13 per cent., Insurance Cos. 8 per cent., 
Trust Cos. 7 per cent, and Co-operative Societies 5 per cent.^ 
Almost every great Japanese firm has a bank established in 
connection with it.**^ Tae famous banking houses of Mitsubishi, 
Mitsuis Sumitomo, and Yasudas have given valuable financial 
assistance to industries. Our insurance companies invest their 
spare funds in Government securities but the Japanese insurance 
companies use their funds in long-term finance to industry. The 
Japanese Government has always taken a leading part in the 
matter. In 1937, Capital Adjustment Law was passed to regulate 
the flow of funds into industry and savings are now mobilized 
and invested according to the discretion of the Government and 
industrial experts. 

The banks in America, too, have actively interested them- 
selves in industrial floatations and have formed subsidiary 
securities companies for the purpose. ‘ In building up... most of 
'the great American corporations, some house or bank has played 
a leading role and relation usually remained close and continuous 
one.’*^ The American banks are no longer content with furnish- 
ing short-term credit.^ Under the Federal Reserve Bank Act 
1934. the Federal Reserve Banks are authorized to make direct 
working capital advances and to buy or discount industrial bonds 
maturing within five years. A method of group finance has been 
developed in America by which larger banks ‘ pump ' credit into 
the country through the smaller banks’. 

The English banks, too, in recent years have departed from 
their traditional policy of purely commercial banking and of 
aloofness from industry. The Bank of England came to the help 
of steel industry and through its support to the Lancashire 
Cotton Corporation contributed to the rationalization of textile 
industries. A subsidiary company, the Securities Management 
Trust Ltd., was formed in 1929 to help in the work of industrial 
reorganization. In 1930 was established Bankers’ Industrial 
Development Co., in which every bank and financial house of 

1. Mitsubishi Economic Research Bureau— Japanese Trade and Industry 
19*56, p. 82. 

2. Allen-Modern Japan and its Problems, p. 174. 

3. Committee on Finance and Industry, 1931, Report, p. 164. 

4. Vide Memorandum on Commercial Banks, 1913-1929, League of 
Nations; p. 329, and also Memorandum, etc., 1925-33, p. 238. 



318 ' 


ECONOMICS OF INDIA AN0 PAKISTAN 


first rate importance took up shares* It represents co-operation 
among banks to assist industry. The company took a leading part 
in the financing of Lancashire Steel Trust.^ In 1934 the Bank 
of England lent its support in the formation of Credit for 
Industry Ltd., by the United Dominion Trust and in the same 
year the Charter House Investment Trust brought into existence 
Charter House Industrial Development Co., Leadenhall Securities ’ 
Corporation was formed in 1935. Large merchant banks like 
Hambros Bank, Baring Bros. • & Co., and Rothschild and Sons 
also engage in industrial finance. The Industrial Section Trust 
and Standard Industrial Trust take prominent part in The finance 
of new enterprises. For affording financial assistance to, industries 
in depressed areas, three funds were recently created — £2 million 
Nuffield Trust, Special Areas Reconstruction Association Ltd.,; 
and the Treasury Fund. . Together up to September, 1938, they 
had found £57 millions of capital for 151 undertakings.^. Now. 
the English banks, are as much interested, in their industry as 
German banks are in theirs. . . 

The insurance companies in England invest J or i of their 
funds in Securities of indtistrial enterprises. 

An Industrial Finance Department has been created in the 
Australian ■ Commonwealth Bank with the object of ‘ providing ‘ 
long-term finance to industries. • 

10, Review of Industrial Finance in India and Suggestions 
for Improvement, The brief survey of Industrial finance abroad, 
given above, shows that even in countries in a.n advanced stage 
of industrialization, special institutions are being set up to help,, 
the industries. But our industries are- receiving little assistance 
from our banks and we have none of the special institutions 
like issue houses of England or other institutions set up feceptly* 
In the case of our industries, either adequate financial assistance 
is not forthcoming or it is given almost at prohibitive price. 

' But tKis is not because sufficient capital does not exist, in 
India. Although India is admittedly poor, yet the requireme^? 
of her industries, too, in the .aggregate are not very large. _ rh£ 
paid-up capital of 10,368 joint stock companies in. British India, 
in 1939-40 was Rs. 2,88,49,60,839 and of 1,004 companies in. 
Indian States R^. 15,17,89,377.. But the Scheduled Banks cash 
and balances with the Reserve Bank in 1935-36 (for nine months 
only) amounted to 37,79,00,000 the total amount ' of ‘Postal 
Cash Certificates outstanding in 1934-35 was Rs*y 65j96,00,000 arid 

, 1. Basu-^'Industrial Finance, 1938, p. 54* , ' , *«nr**'' ^ 

2/ P. B, P. Report op the Location of Industry in Great Britain, 1939, p. 9- 



SOME FA/CTORS'^OF INDUSTRIAL DEVELOPMENT 319 


-Postal Savings Bank 'deposits' Rs. 58,30.00,000* The number of 
banking offices has increased from 723, in December, 1935 to 1290 
in March 1940, . There is therefore no doubt about the adequacy 
of capital resources dn India. “ It cannot be said that the 
number of banking agencies and the amount available for the 
granting of credits.afe insufficient.^’ ^ Nor can the Indian capital 
be now accused of shyness. This is proved by the growth of 
rupee debt from Rs. 146 crores in 1913-14 to Rs. 742 crores in 
1940-41 , and the increase in the paid-up capital of joint stock 
companies from Rs. 80 crores in 1913-14 to nearly Rs. 303 crores 
in 1939-40. Further, one notices that as soon as an opening for 
profitable investment occurs, it is at once tlocded with the 
of capital till it has become un remunerative. The successful 
floatations * of recent Government loans testifies to the same 
effect. The difficulty in India, thus, does not lie. in the paucity 
of funds nor in the shyness of capital but in the uncertainty of 
industrial policy or unsoundness of industrial ventures. 

The fact is that no expert and reliable guidance is available 
to the average Indian investor who himself can hardly be expect- 
ed to judge the profitableness and the safety of an investment* 
The yearly recurrence of so many company failures frightens him. 
Nineteen ‘ hundred and sixty-one companies ‘ stopped business 
between 1931-32 and 1934-35. As the Madras Banking Enquiry 
Committee remarks.: “ It is more a lack of confidence in indivi- 
dual promoters of companies than lack of resources that prevents’ 
enterprises from being able to procure adequate capital by public 
subscription (vide . Report, p. 133). Or, in the words of the 
Industrial Commission, “ The difficulty in raising capital for 
industries is mainly the measure, even in India, not of the 
insufficiency or inaccessibility of money but of the opinion which 
its possessors hold of the industrial propositions put before 
them.” ’ 

In' order to imke up the deficiencies of industrial finance in 
India, it may be suggested that the big commercial banks should 
develop;^ a sympathetic attitude towards industries and should 
maintain a close and continuous association with them so that 
they may be able to give timely and adequate aid to them, 
consistent of course with* their own safety* In the' words of Dr. 
Jeidels, ‘capital market in India seems to be large enough to give 
room m a certain activity of banks in the field of industrial 
financing;^ But they should avoid being entangled too much. ‘A 

1. Report of the Foreign Banking Experts : Indian Central Banking 

, ..i Enciuirf Committee (Majority) Rapewrt, 1931, p. 605. 

2. Vide Report, p. 179. 



320 


ECONOMICS OF INDIA AND PAKISTAN 


banker must never forget that he cannot and must not be an 
industrialist^. 

Sir C. D. Deshmukh, Governor of the Reserve Bank thinks 
that the commercial banks, in their present stage of development 
cannot take any substantial interest in long-term finance. But 
these banks can at least help in the formation of special institu- 
tions, as in England, to act as intermediaries between the industry 
and the investor on the one hand and as financial advisers to 
existing industrial concerns on the other. They should arrange 
for underwriting the issues and provide temporary finance, and 
even long-term credit, in anticipation of this issue. They should 
assist in the reorganization and rationalization of the existing 
industries and in the establishment of new enterprises. 

We should also have industrial banks with the larger propor- 
tion of share capital and receiving long-term deposits to specialize 
in the business of industrial finance. The Government might 
help by taking up a part of the share capital or by guaranteeing a 
minimum dividend and the advances given by the bank. The 
unfortunate experience of the Tata Industrial Bank seems to be 
hauncing still the mind of some entrepreneurs. There is, however, 
no reason to fear if the institution is managed prudently. 

To help the small investor, who cannot make a discriminating 
choice between the different securities offered to him, we should 
have investment trusts, which hold or deal in shares so that they 
can provide the small investor an opportunity of buying ‘blended 
packets’ of a number of securities thus diversifying his investment 
and spreading the risk. 

Special banking institutions may be started to mobilize the 
small and scattered amounts of capital: They should cater for the 
needs of small depositor by offering him better terms and 
facilities. 

It is also necessary to develop the bill market in India by the 
liberal provision of discount and rediscount facilities so .that the 
business men may be able to escape the formalities and inconveni- 
ences inherent in the cash credit system. 

In the U.S. and Japan insurance companies play an important 
part in providing long-term finance. But in India the insurance 
cos. are required by statute to invest 55% of their liabilities in 
government or government approved securities. This is a great 
handicap and must be reomevd. 

1. Dr. Goldschmidt — quoted by the Committee on Finance .and Industry, 
1931. Report, p. 168. 



SOME; FACTORS OF • INDUSTRIAL- DEVELOPMENT 321 - 


It is idle to expect a rapid and satisfactory industrial develop- 
ment without a properly organised system of industrial finance. 
Our industries often languish for warit of finance while vast 
amounts of capital lie dormant. Those that have been mobilized 
are not available to them except at an exorbitant price. If the 
measures suggested above are adopted, it may be hoped that a big 
stumbling-block will be removed from the path of industrial 
development in India. 

11. The Problem of Foreign Capital : One aspect of indus- 
trial development' in India which needs special attention is the 
dominance of foreign capital It is difficult to form an accurate 
estimate of the extent of foreign capital in India.^ We can have 
some idea- from the paid-up capital of joint-stock companies 
registered abroad but working in India which in 193^-39 was £745 
million. But it is possible that some of these companies may be 
doing business in India on a very small Scale and that some of the 
capital may be held by Indians. Similarly paid-up capital of some 
joint stock companies registered in India in rupee capital is held 
by non-Indians, e.g., Buckingham and Carnatic Mills, Cawnpore, 
and Dhariwal Woollen Mills. Therefore, the paid-up capital of 
companies registered elsewhere is no index of the amount of 
foreign capital invested in India, also because it is apart from the 
debenture capital which amounts to more than £100 million. 
Further, there are numerous unregistered private foreign firms 
working in India. But it is enough for our purpose to remember 
that the amount of foreign capital in India is much larger than 
the Indian capital. Although, apart from cotton-mill industry 
which has been its peculiar domain, the Indian capital in recent 
years has become much bolder and has made considerable headway 
in cement, sugar, insurance, banking, paper companies and even 
in jute and tea companies, yet it requires no statistical proof to 
show that leading, concerns in almost all industrial lines are under 
foreign enterprise and are run wi^h foreign capital 

12. Advantages of Foreign Capital ; Foreign capital confers 
considerable benefit on the country making use of it* It may even 
be indispensable for accelerating economic development of a 
country when there is dearth of indigenous capital All the 
Dominions, U.S.A. and Japan borrowed capital from abroad for 
the exploitation of their natural resources. Foreign capital un- 
doubtedly adds to national wealth of the country. Even if profits 
go out, the wages constitute an important gain* The use of foreign 

1* It is said to be anything between iKSCX) and £1,200 million (B. P. Adar- 
kar — Fiscal and Commeicial Pohcy in Industrial Problems of India, edited by 
P. C, Jain, p. i69.> 



322 ' 


ECONOMICS- OF INDIA AND PAKISTAN 


capital results in the creation of assets which may more than cover 
the payment of capital and interest. The railways and canals 
provided with foreign capital will be almost a perennial source of 
national income when foreign capital has been repaid. Foreign 
capital, therefore, can be an important means of bringing about 
economic prosperity: 

The foreign capitalist generally bears the losses in the pioneer--' 
ing stage and this is a gain to the country. Losses in the early 
stages are inevitable. Later, the indigenous capital can take 
advantage of the established lines and go ahead. We have seen 
how the early attempts in glass and iron and steel industries failed 
with losses to the foreign enterpreneurs. 

, ^ Still, another advantage is the technical knowledge brought 
into the country. The foreign capitalist sets up an efficient 
organization and introduces a new technique. If this is gradually 
imparted and passed on to the entrepreneurs in the country, the 
gain is undoubtedly great. But it is a big ‘ IF L If the foreign 
capitalist sedqlously guards the business secrets, no material gain 
results to the country, 

13. Abuses of Foreign Capital ; But the use of foreign- 
capital is generally associated with certain evils. The greatest evit 
is of the political character. It is said that Flag follows the 
Trade’ L A country using foreign capital soon passes under foreign 
domination and several political complications are created, Egypt 
and China have suffered from this domination. In India also 
vested interests had been created. They were slow to identify > 
themselves with this country in and were at once alarmed when 
there was a move to grant any political power to India. The, 
foreign capitalist in India clamoured for, and secured, strongest, 
safeguards in the new Constitution, and he has rendered himself 
obnoxious to the Indian politicians by his persistent. anti-Indian - 
attitude. . . - . 

Another drawback is that the natural resources of the 
country may be exploited for the benefit of a f oreign cpuntry and. 
to the everlasting detriment of the country concerned. In such, 
cases, some would prefer to wait till the indigenous. enterprises 
and capital are forthcoming and not develop the resources, of the 
country at all till then. : . , 

Foreign capital with foreign control is especially dangerous in 
the case of ‘key’ industries and industries connected with national 
defence. The indepepdence of the country is seriously under- 
mined in these circumstances. It is too high a price.for econdmic 
development. 



SOME FACTORS OF INDUSTRIAL DEVELOPMENT 323 


It is also seen that higher and important positions in foreign 
concerns are reserved for their own nationals and Indians have 
to be merely content to be “hewers of wood and drawers of 
water’L No apprentices are trained, and technique and processes 
are zealously kept a secret. In such a case the country derives 
little benefit from the use of foreign capital and sufi^ers from a 
galling sense of inferiority. This attitude of the foreign concerns 
deeply wounds the self-respect of Indians. 

The trouble is that alien concerns remain for ever alien. 
They take the profits and it represents a constant economic drain 
on the country which is impoverished instead of getting richer. 
This is a positive disadvantage. It takes away all inducement, 
whatsoever, to import foreign capital. 

But it is well to remember that these objections are against 
foreign control and not foreign capital. Foreign capital without 
foreign management and foreign control may be quite welcome 
and may be conducive to the economic well-being of the 
country. If, therefore, foreign capital is used under proper 
safeguards, there may be no harm and much good may result 
instead. 

14* Restrictions on Foreign Capital : In order to derive 
the maximum benefit from the use of foreign capital and reduce 
its disadvantage to the minimum, some restrictions on foreign 
Capital seem to be called for. It has been proposed that the 
foreign concerns should be registered in India in rupee capital 
so that Indian investors may get an opportunity of acquiring 
a share in the capital. Further, that a portion of the sham 
capital should be reserved for Indians and that a certain 
number of seats on the board of directors should be remrved 
for Indians. It -is also suggested that these concerns should 
undertake to provide ample opportunities for the training of 
Indian apprentices. No doubt there are practical difficulties 
in actually carrying out these suggestions. The ^ majority of 
the Fiscal Commission and External Capital Committee did not 
believe in their efficacy. But it is worth while to give a trial. 
They also were of the opinion that the restrictions should te 
imposed only when certain definite concessions have been granted. 
But as the minority report pointed oUt, the system or protection 
is itself a hig concession. So many foreign concerns under the 
guise of “India Ltd.” have been formed since the adoption of 
the policy of protection, that the matter has assumed a special 
importance. It is necessary to provide against the advptages of 
■protection being neutralized to the country. Only genuine native. 



324 


ECONOMICS OF INDIA AND PAKISTAN 


concerns should benefit from the sacrifice that the consumer 
has to make under the system of protection. 

15. Foreign Capita! Under the Act of 1935 : The Act of 
1935 does not confer complete fiscal autonomy on the Indian 
Federal Government to. regulate tariffs in order to encourage 
Indian trade and industry. No restriction is to be imposed on 
any British subject domiciled in the United Kindom in carry out 
any occupation, trade or business in India. Any concessicn^ e.g., 
grants, bounties, subsidies, etc , exemption from taxation or 
preferential treatment accorded to Indian companies will be 
automatically enjoyed by companies incorporated in the United 
Kingdom, provided Indian companies are eligible to similar 
concessions in the United Kingdom. Ships registered in the 
United Kingdom cannot be subjected to any discriminatory 
treatment. It is one of the special responsibilities of the Gover- 
nor General and the Governors to see, that no discriminatory 
legislation is passed adversely affecting foreign concerns working 
in India. Thus the Indian Government will not be able to take 
any step to further purely Indian national interests by exclusively 
aiding Indian trade and industry. It will be difficult to protect 
the Indian industry against the competition of powerful British 
industrial concerns The principle of reciprocity, according to 
which we have to give concessions if similar concessions are given 
to our concerns in the United Kingdom, has not much value, 
• because few Indian concerns have the enterprise and resources to 
work there and compete with British industry.^ Unless the 
foreign concerns now working in India completely identify them- 
selves with Indian national interests and aspirations, it will be 
necessary to impose certain, restrictions on them from the purely 
economic point of view so that Indian industry may be assured 
of a fair and equal competition. But a rigid and literal interpre- 
tation of the new constitution will not make it easy to adopt such 
measures. Capital resources of India are now ample to finance all 
sound schemes of industrial development and really there is no 
need for foreign capital to come in. When it comes in, it comes 
uninvited and under protest, e.g., Swedish Match Combine. 

16. The Managing Agency System.; A characteristic fea- 
ture of the management of Indian industries is the prevalence, 
almost universal, of the managing agency system. The managing 
agency is generally a partnership and sometimes a joint stock con- 
cern formed for floating a concern and to take over its manage- 

« ment. It is..^ curious appendage to the joint-stock organization 
in India so as fundamentally to alter its character and working. 



SOME FACTORS OF INDUSTRIAL DEVELOPMENT 325 


The raison d’etre of the system lies in the peculiar economic 
conditions obtaining in India especially with regard to the avail- 
ability of managerial talent and financial facilities. The shyness of 
Indian capital and consequent inadequacy of the amounts raised 
from the investing public, the late development of joint-stock 
banking, the absence of special financial institutions like the 
issuing houses, the lack of competent directorate and the practices 
of commercial banks relating to advances, are some of the causes 
that have conspired to throw industrial enterprises in India iiyo 
the arms of the managing agents. 

Besides purchasing materials and machinery, selling finished 
goods and arranging for insurance of plant, buildings and stock-in- 
trade on behalf of the concerns they manage, the managing 
agents perform three principal functions viz^, (1) pioneering; (2) 
running the routine machinery of the concern ; and (3) provid- 
ing finance. The managing agents do the preliminary prospecting 
to bring the concern into existence and place it on its legs and 
they carry on day-to-day business. Their financial interest in the 
concern is quite considerable. They are the principal share- 
holders and besides lending substantial amounts to the company 
themselves, they arrange for finance from the banks where their 
personal guarantee is almost invariably necessary. It is also their 
reputation and standing which induce some moneyed people to 
place their money with the mill as a deposit. Of the total loans 
secured and unsecured of the Bombay cotton mills amounting to 
Rs. 98,151,000 the advances by the managing agents amounted to 
,Rs, 74,618,000 or nearly 46 per cent.^ At Ahmedabad they hold 
25 to 50 per cent, of the shares and their share in the deposits is 
20 per cent/^ The managing agents are, in short, promoters, 
financiers, mamgers, purchasers, and also agents, all rolled in one. 

Their remuneration takes the form of a fixed monthly allow- 
ance intended to cover the expenses of clerical and secretarial 
establishment plus a fixed minimum commission and a percentage 
on profits besides. A commission on profits brings about a closer 
identity between the interests of the shareholders and those of 
the managing, agents.. 

17, Criticism of the Managing Agency System: The 

managing agency system has been subjected to a close examina- 
tion from time to time especially at the time of passing of the 


1, Report of the Textile Labour Enquiry Committee, 1938, p. 53. 
2- Report of Ahmedabad Miik>wner$’' Association, 1935, p. 138. 



326 ECONOMICS OF INDIA AND PAKISTAN 

Indian Companies (Amendment) Act in 1936.^ 

Among the several evils attributed to the system may be men- 
tioned the subordination of the interest of the shareholders to 
those of the managing agents; opportunities for fraud and 
exploitation and the clash between the interests of the various 
firms under the same managing agency. The system has hindered 
the growth of independent and capable directorate. The direc- 
tors are mere figure-heads and puppets in the hands of the 
managing agents. Out of 175 directors of Bombay cotton mills 
in 1925, 95 were agency directors and only 11 had received any 
technical training.^ The managing agents decide and directors 
register those decisions. Mr. J. A. Wadia, a director of 13 cotton 
mills, stated before the Tariff Board in 1927, that if the directors 
took active part, they had to go. The' development of sound 
relations between the industry and the banking system has also 
been hindered, for the banks lend on the guarantee of the 
managing agents and not on the intrinsic strength of the concern. 
Another count against the system is that the agency firms have 
too many concerns under them. In the words of Bihar and 
Orissa Banking Enquiry Committee, ^ they have got too many 
irons in the vast and uproarious fire of their activities, their out- 
look is too wide and the centre of their operations too far 
removed and financial scale too large,’’ ’Andrew Yule Sl Co.i 
Calcutta, manage 54 concerns. Two firms of managing agents in 
Bombay controlled in 1927, 23 out of 85 millsi! In the hands of 
unscrupulous agents, the system has led to gross abuses like receive 
ing secret and illicit commissions, embezzlement, deliberately 
bolstering up the share values and then unloading at the top 
level compelling the market ‘ to hold the baby callous disregard 
of the interests of the company arid hundred and- one ways of 
exploiting the ignorant and the unwary investor, ‘‘ They 
speculated in the shares of the company, losing contracts .were 
openly passed on to the 'mills. Cotton was purchased by agents 
whose honesty was more than doubtful, coal purchased was 
defective in weight and quality and cdtton was manufactured by 
machinery that was loaded With surreptitious corhinission. Thd 
factory pay-sheet was cnarged with useless or fictitious employees. 
Every canon of honest trading and manufacturing seemed to havfe 

L- For detailed discussion reference may bfe made to Reports of the Indian 
Industrial Commission, 1918, pp. 12-13, Indian Cotton Textile Tariff Board, 
1927, Voi. I, pp, 85-92, 152, Vol. ,11, JEvidence of, Bombay, jSaroda and Ahmed' 
abad Millowners* Association, Vol. IV, Indian Central Banking Enquiry Cbm- 
' mittee (Majority) Report, pp. 275-250, and (Minority) Report, pp. 330-232, and 
Report of Iridian Tariff Board on Cotton Industry, 1932, Chapter IV. 

2. Rutnagar —Bombay Industries : Cotton Mills, 1927, p. 253* 



SOME FACtORS OF INDUSTRIAL DEVELOPMENT 327 


turned upside down and the whole, when considered together, 
gave one the ifnpression that the industry existed for no other 
purpose than to support a gigantic system of swindling^ The 
Indian Textile journal of November, 1899, also wrote about the 
‘‘ rascality and rank dishonesty with which large sections of our 
mill industry are saturated/’ This is no doubt a very strong 
language and a bit exaggerated, yet the managing agency systems 
Cannot be exonerated of some of the charges mentioned above* 

But there are also certain advantages which can be claimed 
for the managing agency system. The good managing agents, who 
have zealously guarded their reputation for integrity and fair 
dealings and whose competence to manage the concern is un- 
questioned, have made this system yield the best of results. In 
particular, they have made the advantages of integration or 
horizontal combination available to the various concerns under 
them and various economies, internal and external, have been 
realized, because one agency sells goods and buys materials, 
machinery and milhstores on behalf of a number of concerns and 
one office manages them. Financial co-operation among various 
concerns has been rendered possible, for the surplus funds of one 
concern . are lent out to another which may be in need. The 
managing agency system combines the advantages of a partnership 
with those of the joint-stock organization. ■ The keen self- 
interest, initiative, virility, resourcefulness and adaptability of 
the partnership are harnessed into tlic service of ^ joiixt'-stO(^ 
company. . The, apparent stiffne^ of the 
practice, is considerably toned 'down. Some 
voluntarily relinquish their commission in hard timai. By their 
timely financial aid they have in many cases prevented the ruin 
of industrial concerns and brought them to a profitable stage^ 
The Paper Pulp Co. showed a debit balance for nine years and 
the managing agents advanced sums varying from Rs. 15 to Rs. 25 
lakhi In 1920-21, seven tea companies were pulled out of the 
slump by advances from managing agents amounting to Rs. 7 
lakhs. , An advance of Rs. 17 lakhs saved from bankruptcy a 
company formed for the production of aeroplane spirit in 1918. 
Although, as Mr, Manu Subedar remarks, * whereas the weaker 
and the less desirable side is inherent in the systejqci/ yet it has 
alsoTarge potentialities. for good. 

In cbticlusion, we may agree with the view of the Industrial 
Commission that the system has a far greater list of successes to 
its credit than cati be shown! by ordinary company management 

1. Ibid., pp. 50-51. 



328 


ECONOMICS OF INDIA AND PAKISTAN 


under indWidual managing directors^ All the same it must be 
said that the system is very expensive and the Indian industry can 
ill-afFord to bear its cost. Not many managing agents can claim 
princely salaries as the minimum amount of commission guaran- 
teed to them. As the concern becomes well-established and the 
period of risk is over, the remuneration of the managing agents 
may well be scaled down. The system has come to stay. No 
legislation can wipe it off. The only remedy against its abuses is 
to organize public opinion and give wide publicity to the nefa- 
rious activities of bad agents. It may be suggested that the 
managing agents should introduce internal reforms, apply the 
principles of scientific management to office organization, acquire 
technical knowledge and administrative ability, cultivate a sense* 
of responsibility, public spirit and scrupulous regard for the* 
concern they manage and should discard get-rich-quick methods. 
They should explore new avenues of industrial development and 
pioneer new concerns. Those who are conservative and are 
reluctant to launch new ventures should have really no place. 

18. The Managing Agents and the Indian Companies 
(Amendment) Act, 1936 : This Act has been described as the 
Magna Carta of the Indian shareholders. Under the Act the 
managing agents^ terms and remuneration have to be sanctioned 
in the general meeting. Their term is now fixed for 20 years, but 
can be renewed and they can be removed earlier if convicted of 
certain offences or if adjudged insolvent. The office cannot be 
changed without shareholders’ premission. Their remuneration 
is fixed at a percentage of net profits subject to a fixed minimum, 
though the terms can be varied by the shareholders. Funds of 
one ' company cannot be ikilized in another and the managing 
agents cannot carry on any’ competitive business on their own 
account. Loans to them ■ are forbidden * except on current 
account. The number of their ^ nominees on the board of 
directors is fixed at one-third. This is undoubtedly a great 
improvement. But the managing agents can still a^,t on behalf of 
several similar concerns • and their interest in' all may • not 
coincide. As purchasers of the goods of and sellers to another 
company, they can still make illicit gains.. The Act makes their 
position secure for 20*years if they like to stay, but does not safe-^' 
guard the interest of the shareholders if they do not. -The fact" 
IS that no law can safeguard the interest of individuals when, they 
themselves are not vigilant enough. The shareholders’ are. 
ignorant, indifferent and lack corporate spirit and that vigilance 
which alone tan assure success of a' democratic institution like 
the joint-stock organization. 



SOME FACTORS OF IHOUSTRlAL DEVELOPMENT 329 

19 Saving and Investment ; How hoarding can be done 
away with The amount of capital in any country depends on 
the power to sav > and the will to save* The power to save is 
very poor in India. The majority of zamindars till uneconomic 
holdings and find it hard to meet both ends, leave aside saving 
arid investing. The few who are lucky enough to be outside the 
pale of a deficit economy are improvident and save little for the 
rainy day Whatever little is, however, saved in the villages is 
converted into silver and gold ornaments, for, either there are 
no banks in the vicinity to attract swings or the villager has not 
enough confidence to trust his savings to a bank. 

Considering that India’s teeming millions run up to ll5 of 
the population of the world, and that during the last four 
centuries and a half India has not absorbed more than 14 per cent, 
of the total output of goldh the charge that India is a sink fca 
precious metals falls to the ground. India absorbs ‘ precious 
metals for art purposes, so do Europe and America, who consum- 
ed no less than 30 per cent, of the total gold output during the 
time that India absorbed a bare 14 per cent, according to the 
above-quoted authority. 

Hoarding was inevitable when life and property were not 
safe in India. Social conditions (like the dowry system) also 
encouraged it. Circumstances are, however, changing and things 
in this direction have considerably improved. These are no 
arguments for complaisance. Efforts should be made to provide 
opportunities for saving and investment and to discourage hoard- 
ing. The following steps might be helpful in this direction. 

(1) The Central Banking Enquiry Committee was convinced 
that there was not much hoarding in India, but at the s^e time 
stressed the need for extension of deposit banking. Branches 
should be opened in places where no banking facilities existed 
rather than in big towns where a large number of banks 
already represented. The man in the village has to be reached 
and his savings collected. 

(2) Post-offices should supply enhanced facilities to the ^all 
man. A more tempting rate of interest should be offered to 
tempt him to deposit his meagre savings.^ If the facility or 
withdrawing money by cheques written in Indian languages could 
be provided, it would also provide a fine incentive for literacy. 

1. Mr. Joseph Kitchen in evidence before the Royal Commission on 
Indian Currency and Finance in 1926. 

2. This has been done recently, the rate being rais&d from pet cent to 
1 ^/4 per cent. 



330 - JfCONOMiCS OF INDIA AND PAKISTAN 

The return on Postal Certificates, Defence Bonds and 
National Savings Certificates Was increased by Government in 
the year 1943* This is a step in the right direction as dt would 
promote investment^ among people who command moderate 
means* , ^ ^ 

(3) A more active and intensive propaganda - should be , 
carried on to increase the number of .women’s co-operative . 
societies in the villages.- This would tap a source but is little 
exploited so far. Women are naturally thrifty in this country. 
The, , inculcation of the habit of investment, among them would 
more surely work towards discouraging hoarding in India than 
anything else. Joint-stock banks should open special departments 
fof women which should be in Ihe charge pfTady-assistants., 
Such step would promote business habits among women and ^ 
induce them to invest their money in the banks - rather than 
ornaments; " , 

: (4) Education is the spundcst remedy against all traditional, 
uneconomic habits. The present system pf education needs a 
thorough overhaul in India. The recent scheme by Mr. Sargent, 
the Educational Commissioner "with the Government of India,' is ! 
vcty^ comprehensive and, in a way, idealistic. Even if it is 
adopited piecemeal it would revolutionize the system of education 
in the country and ultimately encourage banking habits aUiong ■ 
the masses. A knpwledge of elementary economics imparted in 
the Ihdian languages at the matriculation stage Would filso help ■ 
matters. Lectures arranged under the auspices ^ pf Bankers’ 
Institutes and Chambers of Commerce in different parts of the 
country and pamphlets would also be of use. 



CHAPTER XV 


INDUSTRIAL LABOUR 

1 . Growing Importance of Industrial Labour in India : The 

rise of the wage-earning class in India has been very slow* Pre- 
dominance of agriculture and attachment to land, the existence 
of joint-family system and the absence of successful industrial 
career are some of the causes which prevented the rise of the 
industrial labour in India. Demand for Indian labour for colonies 
and for plantation raised some labour problems. But after the 
World War I there was a general awakening and Indian labour 
also became conscious of its strength and rights. The influence 
of the International Labour Organization also tended in the same 
' direction. The appointment of the Royal Commission on Labour 
and the advent of Congress Ministries with a definite bias for 
' labour welfare deepened general interest in labour in recent years. 
The Labour Commission gave impetus to labour legislation and 
brought the labour problems to the forefront. Growing impor- 
tance of labour is shown by the fact that the representatives of 
various industries met in a conference in 1940, to discuss what 
attitude to adopt towards the steps that the Central and Provincial 
Governments contemplated to take to ameliorate labour condi- 
tions. Industrial Labour in India and Pakistan is now a force to 
be reckoned with. 

2. Sources of Labour Supply and Methods of Recruitment : 

There was a time when there was a chronic shortage of labour. 
In 1905 on the complaints made by the employers of U.P. and 
Bengal an official inquiry was made into the shortage of labour. 
In view of large and increasing population of India this shortage 
was anamolous and surprising. This scarcity was due to lack of 
training facilities, absence of suitable recruiting agencies, lack of 
knowledge, undeveloped means of communication, low wages, 
high cost of living and bad housing conditions, trying conditions 
in the factories and prevalence of frequent epidemics. Although 
conditions in these respects are not even now completely satis- 
factory, yet a marked improvement has been made, with the 
result that no industry now experiences any shortage. With the 
exception of mines and plantations which have some peculiar 
difficulties, saturation point seems to have been reached now in 
all industries and competition for employment is becoming keener 
and keener. 



332 


ECONOMICS OF INDIA AND PAKISTAN 


With the exception of Bombay, Calcutta, and Jamshedpur, 
all other industrial centres draw their labour supply from the 
surrounding areas, e.g , at Ahmedabad 65 per cent* of the labour 
supply may be called local. Cawnpore also depends for labour 
supply on its immediate neighbourhood. Such is the case in areas 
where population is dense and pressure on land is acute. For 
Bombay the recruiting areas are in the Ratnagiri District, and the 
nearby Deccan districts. Most of the labour supply for Calcutta 
hails from outside a radius of 250 miles especially from Bihar, 
C.R, U.P., and Madras. Bengalis generally shun manual labour. 
Jamshedpur draws its labour supply from all over India* 

Recruitment, till recently, was done through intermediaries 
called jobbers, mukaddams, sirdars or mistries. Although primarily 
a charge-man is entrusted with the work of supervising labour, the 
jobber occupies a position of much greater importance* For 
technical training, transfer to a better job, promotion and aid in 
private and domestic matters, the worker comes to lean on him 
and is often completely at his mercy* The jobber has taken full 
advantage of his position by extorting bribes from the workers. 
Virtually he has been the ear and the voice of the mill manager. 
But the position is now changed somewhat. Larger and more 
progressive mills have now appointed labour officers to look after 
labour and have begun direct recruitment, though in the majority 
of the concerns the old method is still prevalent. Instead of 
being recruited in the village, labour is now recruited at the 
factory gate. In the matter of recruitment, leave, wage payment 
and discipline, labour is now placed under the departmental 
heads* The introduction of jobbers’ record system and adoption 
of badiZ-control system in connection with the employment of 
casual labour, have minimized corruption to some extent* But 
in view of the intermittent and fluctuating character of labour 
force,- it is difficult to establish a permanent and living contact 
between the management and labour. Therefore the jobbers still 
continue to wield an influence which cannot be called inconsider- 
able and his grip over the worker continues to be strong. 

3, • Labour EflFiciency in India ; The human factor is very 
important in industry as in any other sphere of economic life. 
Industrial progress depends, in a very large measure, on the 
efficiency of industrial labour* In this respect India does not 
seem to be happily placed. 

Attempts have been made by some to represent relative 
.inefficiency of Indian labour in terms of output or number pf 
hands employed per unit of macl^inery* It is pointed out that 



INDUSTRIAL LABOOUR 


333 


an operative looks after 240 spindles in Japan, 5J0 to 600 in 
England and 1,120 in U.S.A. but only 180 in India. Again, a 
weaver in India, it is said, attends to two looms, in U.K. to 4—6 
and in U.S.A. 9. Sir Alexander MoRobert opined before the 
Industrial Commission that an English worker was 3.5 or even 
four times as efficient as an Indian worker. According to Sir 
Clement Simpson’s calculations 2.66 workers in a cotton spinning 
and weaving mill in India are equivalent to one operative in 
Lancashire. But such statements do not reflect on any innate 
inferiority of the Indian worker. More workers are employed in 
India per unit of machinery, because labour is cheap and machi- 
nery is dear and less output per worker is often due to tae use 
of bad material, out-of-'date machinery, bad control and derective 
management. Therefore we cannot subscribe to these pseudo- 
mathematical representations of the relative efficiency or ineffi- 
ciency of Indian labour. But it cannot be denied at the same 
time that even after making allowance for all factors, the fact 
remains that Indian labour is less efficient as compared with, say, 
English or Japanese labour. Therefore in India while wages are 
low, labour is dear, although Sir Hormusji Mody’s sta cement 
before the Labour Commission that a weaver in India was paid 
200 — 300 per cent, more than a weaver in China or Japan must be 
considered an exaggeration. 

4. Why Indian Labour is Relatively Less Efficient : There 
are several factors, for most of which the worker himself can 
hardly be blamed, which are responsible for lower efficiency of 
Indian labour. Apart from the enervating Indian climate, poor 
physique, illiteracy and lack of technical training and less discip- 
lined character, the following are the main factors which lower 
the efficiency of Indian factory worker : — 

Mrgmtor:y Character. Unlike in the West where factory 
population is permanent, Indian labourers are mostly migrants 
from the villages. They leave the village to escape from destitu- 
tion and numerous social disabilities, or penalties for offences 
against the village social and moral code, or from the money- 
lender, and to improve their economic condition with a view to 
purchasing land or other property. The excessive pressure on 
Jand and the decay of village crafts and better opportunities in 
the city drive the people from the villages to the factory areas. 

But they do' not permanently sever their connection with 
the- village, because, as the Labour Commission remarks, the 
driving force comes from one end of the channel only, i.e., the 
village end. ’^They are pushed,, ^t pulled, to the city.” Strange 
and novel environments of the ci^, its insanitary conditions and 



334 ECONOMICS OF INDIA AND PAKISTAN 

high cost of living and lack of employment for the whole of the 
family, compel them to leave their families in the village to which 
they desire to return sooner or later. 

The migratory character affects efficiency. The worker does 
not feel quite at home in the artificial city life and the strange 
environments subject him to severe strain, and he becomes a 
victim to sickness and disease. The' fatigued body and over- 
stimulated mind find dangerous relief in alcohol and gambling. 
Discipline, long hours of work in a factory to which he is not 
used, homesickness and mental depression all adversely affect his 
capacity for, and interest in, his work. 

There is, however, the other side too. The villager brings to 
the factory better physique, and combination of rural and urban 
life widens the outlook. The periodical visits to the village 
constitute a nice and cheap holiday which improves his health. 
Besides, he becomes an instrument for the diffusion of knowledge 
in the village and thus quickens the mind and enlarges the out- 
look of the people of his village. The village offers a safe and 
comfortable asylum in sickness, strikes and lock-outs, in old age 
and in maternity. For all these reasons the connection with the 
village, according to the Labour Commission, is an asset of 
incalculable value. On the whole, therefore, the ^migratory 
character of Indian labour is not a cause of his relative ineffi- 
ciency. 

Low Wages, Efficency of labour depends upon nourishing 
diet, proper housing and other amenities. But the wages in 
India are too low to purchase these. For the paltry sum that a 
worker in India gets he cannot be expected to put in his best 
and his efficiency must be low. 

Low Standard of Living, It follows from low wages that the 
standard of living of the Indian worker must be very low. 
Inadequate and unbalanced diet, a. dirty hovel to live in, shabby 
and insufficient clothing to cover his limbs, and complete absence 
of expenditure on medical aid, education and recreation must 
affect his health and efficiency. It has been shown that an extra 
glass of milk has increased height 33% and weight 81%. The 
Indian worker’s diet compares unfavourably even with that of 
the prisoners. The average monthly income of a worker’s family 
varies from Rs. 45 to Rs. 50, and a large part is swallowed up by 
debt and travelling expenses to and from home' and a part 
squandered in gambling and ciriink;* With such a meagre income 
it is idle to expect a worken^ maintain himself in reasonable, 
comfort and no wonder that ms'efficiency is low. 



INDUSTRIAL LABOUR 


335 


. Long Hours and Trying Factory Conditions, A worker who has 
to work for 10 — 11 hours every day in the summer hot days or in 
severe winter in a congested and ill-ventilated factory under an 
unsympathetic manager cannot put in his best* He cannot be 
blamed for loitering if he is compelled to rest and look round a 
little to get some relief which he so badly needs. Factory en- 
vironments represent a marked contrast to his native environ- 
ments. His efficiency must naturally suffer* 

Unsatisfactory Housing. A further 'cause of industrial ineffi- 
ciency is the appalling condition in which the workers are 
housed. Insufficient accommodation, the dark and stuffy interior 
of the tenements and their squalid surroundings are the chief 
features of a working class colony. Single-room tenements seem 
to be the rule and most of them are not fit for human habitation. 
They are said to be “ cold in winter, hot in summer and wet in 
rains.*’ In 1932 the mills housed 20% of their workers in Bombay, 
15% in Ahmedabad and 12% in Sholapur. Conditions in this 
respect have been improving in recent times. Many jute mills 
in Calcutta and cotton mills in Bombay provide quarters for a 
fair proportion of their employees, but majority of the textile 
workers are still unsatisfactorily housed. In other industries, 
conditions are a little better. Most of the sugar mill employees 
are lodged in mill quarters in open surroundings. Coal mines 
in Jharia and Bihar have provided good sanitary quarters of 
approved designs. The housing arrangements at Jamshedpur by 
the Tatas and at Nagpur by the Empress Mills are very good. 
The former has built a garden city of 8,000 ^houses costing, up 
to 31st March 1942, Rs* 137 lakhs and the latter has laid out a 
model village with all the necessary amenities. In both cases the 
employees ‘^re encouraged by loans given on liberal terms repay- 
able in easy instalments to build houses for themselves. Further, 
slum clearance programmes have been undertaken by the munici- 
palities in Calcutta, Bombay, Madras, Karachi and Cawnpore, the 
Improvement and Port Trusts and some Provincial Governments. 
The Bombay Government has completed nearly one-third of its 
gigantic programme of building 625 chawls with 50,000 tenements. 
Several “Provincial Governments have under their consideration 
housing schemes to clear the slums* But it is a big problem, and 
no early and easy- solution may be expected. Reports of Health 
Departments in the principal industrial areas still sadly reflect on 
the dfit; dust and congestions of the workers’ colonies* A note 
by the Delhi Improvement Trust presented in the First Confer- 
ence of Labour Ministers held in January, 1940, showed that 
88,000 people lived in condition of congestion prejudicial to health 
and convenierice* ' In these circumstances Indian labourer must 



336 


ECONOMICS OF INDIA AND PAKISTAN 


continue to show a lower degree of efficiency. The Ahmedabad 
Labour Union in ‘'A plea for Municipal Housing” points out 
the standard of working class houses obtaining in advanced 
countries where they have three to four rooms, with a kitchen 
and a bath. Our workers cannot even dream of such an accom- 
modation. What stan^rds of work can we expect from them ? 
The problem of impro>(^ housing is now receiving the attention 
of the Government of India who have set up a committee to 
examine the whole subject. 

Absenteeism, There was a high turn-over of labour in Indian 
factories. Ahmedabad millowners stated before the Factory Com- 
mission in 1907 that out of 350 workers in the year, only 50 
remained in the second year. It is considered that a worker 
availed himself -of 2-3 days’ holiday in a month and 3-7 weeks in 
a year. It necessitated the employment of reserve with additional 
costs to the conceriK^. ' 

Indebtedness, Being'^in debt has adverse psychological effect 
on theworker and impairs efficiency. Now the moneylenders are 
forbidden by law from molesting the worker, but formerly they 
always sumunded the factbry gates. The usual rate of interest 
varies {rom^5 to 150%, Once in debt, therefore, it is impossible 
for a worker fe extricate himself. An inquiry in Madras showed 
that of 800 workers all but 13 were in debt on an average for 
about 6 months’- wages.^ 

Other factors responsi^ for relative inefficiency of Indian 
labour are the defective and inexperienced management, use of 
bad machinery and materials and weak labour organization. Dr. 
Vera Anstey thus sums up the position : “Not only is the 
labour supply/intermittent, fluctuating, lacking in ambition 
and insensitive to the spur of higher wages, but the customary 
leisurely methods and the bad conditions of life of the urban 
industriaUworker reduce his efficiency and output. If we con- 
sider the iniquitous housing, insanitary surroundings and unsuit- 
able dietary (usually also of indebted) factory population of large 
towns, it becomes obvious that the worker’s physical and mental 
condition cannot, be anything but sub-normal. When it is 
realized that the labourer who is obliged to live in such uncon- 
genial, unhealthy and soul-destroying surroundings, is in any case 
illiterate superstitious and untrained, is if t6 be expected — en- 
tirely without prejudice to his mental abilities— that at any wage, 
however low, his services can be really bheap ? ” ^ 

1. &iva Rao — The Industrial Worker in India, pp. 1331-35. 

2. Vera Anstey — Economic Development of India, 1936, p. 230. 



INDUSTRIAL LABOUR 


337 


In order to improve efficiency, it will be necessary to adopt'a 
comprehensive programme of labour uplift. Greater diffusion of 
technical and general education, raising of wages to a reasonable 
level, reduction of hours, improved housing and other improve-*, 
ments in working conditions are bound to affect favourably the 
efficiency of the workers. But above all, a radical change in our 
ideals is necessary. So long as a worker suffers from a sense of 
insecurity and fear of unemployment, and so long as he feels 
that he is working for others, his efficiency cannot rise to the 
highest pitch possible and he will try to do the least and get 
the most out of it. He must, on the other hand, be made to 
feel that his work fulfils a social purpose and he must be guan 
anteed complete security from want and fear, for thus alone can 
he have the right morale. 

5, Labour Welfare Work : In the past a few enlightened 
employers, missionary societies likeY.M. C. A. and social organ- 
izations like Bombay Social Service League, Seva Sadan Society, 
etc., interested themselves in promoting labour welfare. Labour 
organizations, too, have taken keener interest now in this 
direction. It is now recognized that this type of work is not to 
be carried on purely humanitarian grounds but also for economic 
reasons inasmuch as it has a direct bearing on labour efficiency 
besides giving labour an added sense of dignity and responsibility. 
Since the advent of Provincial Autonomy the Governments 
in Provinces became more actively interested in this type of 
work. Bombay Government was lucky in getting the services of 
Mr. Gulzari Lai Nanda as Parliamentary Secretary. He was 
Secretary of the Textile Labour Association, Ahmedabad, for, 
m,ore than 20 years, and no person could have greater interest irt.' 
labour welfare work than he. The Bombay Government budget- 
ed Rs. 1,20,000 in 1938-39 and 1,93,000 in 1942-43 for this work. 
Other Provinces have more or less followed the lead given by 
Bombay. Welfare centres by now have been, established in the 
important industrial towns of the country like Bombay, Ca.lcutta, 
Madras, Karachi, Cawnp.ore, Nagpur, etc. The Indian Govern- 
ment has also appointed General Adviser on welfare work. 

■ Among the labour welfare items may be mentioned in 
educational classes, circulating libraries, - indoor and outdoor* 
recreational activities like games, sports, dramatic performances, 
lantern and other lectures, cinema shows, radios, nursery schools, 
medical aid, maternity- arrangements, etc. An industrial training 
workshop has been established at Ahmedabad by the Government 
of "Bombay. The work done by the Textile Labour Association, 
Ahmedabad, f especially in the medical and educational sphere (its 



338 


ECONOMICS OF INDIA AND PAKISTAN 


educational expenditure amounts to Rs. 50,000 every year), the 
Tata Iron and Steel Company, Jamshedpur, the Empress Mills, 
Nagpur, the Buckingham and Carnatic Mills, Binny Mills, Delhi 
Cloth Mills, etc., deserves special mention. 

6. Labour Legislation : Since the advent of modern 
dustry, the employers wer^ free for a generation to use their 
labour in any manner th^y liked unhampered by any factory law. 
The result was that the' hours were inordinately long and the 
wages unduly low. Labour, especially of women and children, 
was exploited to the fullest extent possible. The conditions in 
the factories were isihuman and intolerable. For injuries received 
in the factory, which the unfenced machinery freely inflicted, 
the worker did not receive any compensation. The heart- 
rending conditions awakened the sympathies of men like Sorabjee 
Shapurjee Bongali. The Lanchashire manufacturers also pressed 
for factory legislation in India, because they thought the absence 
of it placed the Indian manufacturers at an advantage. A Factory 
Commission was appointed in 1875 which led to the passing of 
the first Factory Act in 1881. Under this Act the children got a 
limited protection. But the adult labour continued to suffer. 
No child was to be employed below the age of seven and the 
number of hours for them were fixed at nine. There was a 
provision for four holidays in a month and proper rest intervals. 
Fencing of dangerous machinery was not provided nor the . 
reporting of accidents. In the absence of proper factory inspec- 
tion the Act remained almost a dead letter. 

The Act naturally did not satisfy the workers or their 
sympathizers. The workers had to work from sunrise to sunset 
even on Sundays, and the holidays were devoted to the cleaning 
of machinery. They did not get any time even for meals. An- 
other Factory Commission was appointed in 1890 and, on their 
recommendations, the second ' Factory Act was passed in 1899. 
According to this Act, the minimum age for employment of 
children was raised to nine, and hours of work for those between 
ages of nine and fourteen reduced to seven. No woman was to 
work between 8 p,m. and 5 a.m. and the maximum number of- 
hours for them were fixed at 11 with an interval of li hours. 
Other provisions were : half an hour compulsory rest daily and 
a weekly holiday. The Act applied to factories employing fifty 
persons as against 100 persons in the first Act and the Local 
Oovernments were empowered to apply it by notification even^ 
to those employing 20. 

For the next twenty years no step forward was taken in 
the'maftet of ketory legislation. ' During this period two evertts- 



INDUSTRIAL LABOUR 


339 - 


of great importance took place, viz* the advent of electricity and 
plague. The latter seriously cut down the number of workers, 
who came to be actually auctioned at street concerns. Scarcity 
of workers led to excessive hours of work. In 1906 Freer Smith 
Committee and in 1907 a Factory Commission inquired into the 
working conditions and they referred to the evasion of the 
previous factory laws. This led to the passing of the Factory Act 
of 1911. Its principal provisions were: 12 hours the maximum 
limit for men and 6 for children, regulations to ensure safety and 
health and to make inspection more effective by providing 
penalties for breaches. 

•m 

During the World War I, there was intense indusMal 
activity. While the employers made huge profits, prices soared 
high, wages lagged behind. The workers got their chance at the 
end of war when influenza epidemic had thinned their ranks. 
In addition to demand for higher wages, there was a demand for 
reduction of hours and many concerns themselves agreed to 10^ 
hour day. The factory law was amended and consolidated in 
1922. 

The Factory Act of 1922 applied to factories employing 20 
persons, prohibited the employment of children under 12, and 
in two factories in the same day, fixed 6-hour day for those 
between 12 and 15 years of age and a half-hour interval after 
4 hours’ work, and limited the hours of adult workers to 60 per 
week and 11 per day* Women were not to work between 7 
p.m. and 5-30 a.m. It contained provisions relating to compul- 
sory rest intervals, a weekly holiday, measures for health and 
safety and for controlling excessive artificial humidification in 
the interest of worker’s health. 

Minor amendments were made by the Acts of 1923, 1926 
and 1931. 

The working of the Factory Acts revealed their shortcomings 
and the labour leaders and social reformers agitated for bringing 
the factory legislation in India into line with that in advanced 
countries. The Royal Commission on Labour was appointed in 
1929 and it conducted a comprehensive inquiry into the various 
labour problems of India. A crop of legislative measures resulted 
from their recommendations. The factory legislation was over- 
oauled by the Indian Factories Act of 1934. According to this 
Act, no child between 12 and 15 years is to work for more than 5 
hours a day and non-adult workers between the ages of 12 and 
17 have to produce a certificate of fitness. In the case of adult 
workers the maximum number of hours was limited to 10 per day 



340 ECONOMICS OF INDIA AND PAKISTAN 

or 54 in the week. There is a provision for a weekly holiday 
and a rest interval after 6 hours’ continuous work. The seasonal 
factories permitted one to work 11 hours a day or 60 hours per 
week. The factories can be called upon to adopt cooling measures 
for the comfort of the workers. The factories have to provide 
adequate water supply, a shelter for rest, suitable rooms for 
women and children and adequate first-aid equipment. The Act 
also limits overtime working and provides for extra pay for the 
overtime put in. There are provisions for the security of factory 
structure.* Limits have been imposed on the power of Local 
Governments in granting exemptions. 

The Factories (Amendment) Act, 1944, removed some defects 
of the Act of 1934 and met some difficulties experienced in 
its administration. An amended Act passed in March (1946) has 
reduced hours of work to 54 for seasonal and 48 for perennial per 
week. 

In recent years there has been increasing tendency on the 
part of Provincial Governments to apply the provisions of the 
factory law, by notification,- to all factories employing 11 or more 
persons by making registration of such factories compulsory. 

7, Legislation for the Mines ; A separate set of laws was 
passed to regulate working conditions in the mines. The first 
Act, which was passed in 1901, only contained provisions relat- 
ing to safety and inspection, but was silent about the hours of 
work. The' Act of 1923 fixed 60 hours per week for workers 
above-ground and 54 for under-ground workers, but the number 
of daily hours' was not limited which was done by the 1928 Act 
when a maximum of 12 hours per day was fixed. As a result of 
the adoption of Draft Convention in 1931 by the International 
Labour Conference and recommendations of the Labour Commis- 
sion, the Indian Mines (Amendment) Act was passed in 1935. It 
prohibits the employment of any person in mines for more than 
six days in a week. For the workers above-ground, the maximum 
number of hours is 54 per week or 10 per day and .9 hours for 
those under-ground. No child under 15 years can be employed 
in a mine. It * also provides for the recording of accidents 
necessitating absence for more than -seven days. Women cannot 
be employed under-ground. This provision was relaxed for the 
duration of war In coal mines due to shortage of coal. Rules 
framed in 1936, 1937 and 1939 provide for taking strong measures 
to ensure safety. Mines Boards have been set up with the object 
of regulating conditions telating to general health of the mines 
workers. 



[KDUSTRIAL LABOUR 


341 


8, Some other Labour Laws : Besides tlie laws mentioned 
above, there ate several other laws relating to labour of which the 
following deserve special mention : — 

Payment of Wages Act, 1936 : Although it applies to railways 
and factories, yet its operation can be extended to tramways, 
quarries, inland vessels, plantations, etc. The maximum wage 
period has been fixed as one month, and wages must be paid in 
currency or coins. Concerns employing less than 1,0C0 persons 
^must pay the wages before the expiry of the seventh day after 
tUfe last day of the wage period and those employing more than 
IjOCO before the tenth day after the expiry of the wage period. 
In case of termination of services, all amounts due must be paid 
before the expiry of the second working day after such termina-- 
tion. The permissible deductions from pay include fines, for 
damage or loss of goods expressly entrusted to the employee, pay*' 
ment for housing accommodation, recovery of advances or adjust- 
ments of overpayments, for income-tax, contributions to provi- 
dent funds, postal, insurance, co-operative dues, for any order of 
a court of law, etc. No deductions are permitted for damage to 
material in course of manufacture. Fines are not to be imposed 
on children. Fines can only be imposed for offences, previously 
notified and approved by the Provincial Government and the 
person fined must get an opportunity to show cause why he should 
'not be fined. The total amount of the fine in the wage period h 
not to exceed half on anna in the rupee and cannot be recovered 
in instalments or after the expiry of 60 days after its imposition. 
A record of fines has to be kept and the amounts realized must 
be spent on purposes beneficial to the workers. Fine for absence 
must bear the same proportion to the total wage as the period of 
absence bears to the total wage period. 

9, Workmen’s Compensation Acts : Up to 1923 an employer 
could be sued in a court of law under Fatal Accidents Act of 1885 
in case of death by accident. But the law was practically a dead 
letter. The first Compensation Act was passed in that year and it 
provided for a compensation to be paid to the employee in ca^ 
the accident occurred during and in course of employment. 
Amending Acts were passed in 1926, 1929, 1931 and 1933. The 
worker is nOt eligible to any compensation in case he was drunk 

' or if 'he wilfully' disobeyed, the rules qr disregarded the safety 
devices. The Act also covers occupational diseases the list of 
' which is fairly long. ' Persofis employed in clerical or adminis- 
trative capacity and those getting more than Rs. 200 p.m. are not 
\ eligible for compensation. The Act has been given a fairly wide 
‘ application and the Provincial Governments can extend its opera- 



342 


ECONOMICS OF INDIA AND PAKISTAN 


tion to any other occupation they deem hazardous. The amount 
of compensation in case of a fatal accident depends upon the 
average monthly wages of the deceased, and, in case of injury, 
on the monthly wage and the extent of the injury. For those 
getting less than Rs. 10 p.m. the compensation in case of death is 
Rs. 500, for permanent disablement it is Rs. 700 and the wage and 
a half for a temporary disablement. When the monthly wage is 
between Rs. 50 and Rs. 60, the corresponding figures are 1,800, 
Rs. 2,320 and Rs. 15 p.m. respectively. The amounts of compen- 
sation for persons earning over Rs. 200 are Rs. 4,000, Rs. 5,Q00 
and Rs, 30 p.m. respectively. In the case of minors, the compen- 
sation for death is Rs. 200, for parmanent disability Rs. 1,200, and 
half the wage for temporary disablement. To safeguard the 
interests of the dependents all fatal accidents have to be brought 
to the notice of the Commissioner and the amount of compensa- 
tion has to be promptly deposited with him when the employer 
admits the liability and in case he does not, the dependents 
are informed accordingly. Two minor amendments were made 
in 1939, From July 1924 to the end of 1938 there were 280,000 
accidents and the compensation paid amounted to over a crore 
and a half of rupees. In 1943 there were 44,826 accidents and 
Rs. 22,83,991 were paid as compensation. The Labour Conference 
held in November, 1945 decided to recommend the amendment 
of the existing legislation and make it more favourable to 
labour. 


10. Maternity Benefit Legislation : How unsympathetic the 
Indian legislators were to the cause of women can be gathered 
from their rejection in 1924 of a Maternity Benefits Bill moved by 
Mr. N. M. Joshi. After five years, however, the Bombay Govern- 
ment passed the Maternity Benefits Act which was substantially 
amended in 1935. Such Acts have now been passed in almost 
all Provinces and they apply not only to factories but also to 
plantations and mines. These Acts provide for compulsory rest 
and a cash benefit for a certain period before and after childbirth, 
subject to the condition that the employee has put in service 
for a. period varying from six months to a year. During the 
period of this cash benefit, the employee concerned cannot take 
up service elsewhere. Maternity benefit is included in the schenie 
of social insurance prepared by the Government of India 
recently. 


11. Bmployment of Children’s Act 1938 and Amending Act 
of 1939 : ■ These Acts seek to, prevent the employment of 
children under 15 years in transport services, etc,, and below 
12 years in certain industrial occupationsj the Provincial 



INDUSTRIAL LABOUR 343 

Governments being authorized to add to the list of such 
occupations. 

The Children (Pledging of Labour) Act, 1933, seeks to 
abolish a type of child slavery. 

12* Plantation Labour Laws : ^ The first law was passed in 
1863, then others followed in 1825, 1870 and 1882. The Assam 
Labour and Emigration Act was passed in 1901. It regulated the 
recruitment and employment of indentured labour in Assam 
and subjected the workers to penal contracts. It involved a 
form of salvery and was therefore an eyesore to all self«*respecting 
Indians. The principle of indentured labour was withdrawn 
in 1915 and penalties for breach of contract were done away 
with in 1927. In pursuance of the recommendations of the 
Royal Commission on Labour, the Tea Districts Emigrant Labour 
Act was passed in 1932. It aims at exercising necessary control 
over recruitment in the interests of emigrants to tea gardens. 
Although no licence for recruitment is now required, yet the 
recruits have to be forwarded through prescribed routes where 
arrangements for feeding, rest and medical aid have to be made. 
The emigrants have the right to be repatriated at the employers’ 
expense after the first three years of service or even within one 
year if the work is not suited to their personal capacity or for any 
other sufficient reason. Persons under sixteen years unaccompani- 
ed by their parents or guardians and a married woman without 
her husband’s consent cannot be recruited. There is a provision 
for the appointment of a Controller of Emigrants with one or 
more Deputy ' Controllers and their establishment expenses have 
to be met out of a cess levied on each worker recruited in the 
form of a charge for a certificate which the employer must ge 
for each employee, failing which he may be fined up to Rs. 500. 

13. Legislation Relating to ^ Shop Assistants; It is well 
known that persons working in shops and other commercial 
establishments have to work very long hours, sometimes from 
dawn till late after dusk. While the factory workers attracted 
the notice of philanthropists, nobody paid any attention to 
the miserable lot of the shop assistants who did not get any 
holiday at all or any break for rest or meals. Bombay was the 
first to pass Shops and Establishments Act which came into 
force in November, 1940. Three other Provinces, the Punjab, 
Bengal and Sind followed suit. The Punjab Trade Employees 
Act came into force on 1st March, 1941, the Bengal Shops and 


1. For a history of tea plantations labour legislation see S. M. Akhtar : 
Emigrant Labour to Assam Teo, Gardens, 1939» 



344 


ECONOMICS OF INDIA AND” PAKISTAN 


Establishments Act from 1st April, 1941, and the Sind Act 
from 20th November, 1941. These Acts provide for a weekly 
closing and a weekly holiday for employees, the maximum daily 
hours, the opening and closing hours, remuneration for over- 
time, holidays with pay, etc. There are, however, certain 
variations as between one province and another. The Punjab 
Act has the most extensive applications, but exempts shops 
dealing with perishables, medicines, places of public entertain- 
ments, clubs, hotels, domestic servants, etc., from provisions 
relating to opening and closing hours and ‘close dayh- Only 
the Punjab Act fixes the opening hours 7 a.m. in summer and 
8-30 a.m. in winter, while in some other Provinces only closing 
hour is fixed. The closing hour in the Punjab Act, like the 
opening hpur, varies with season and is not later than 9 p.m, 
in winter and 10 p.m. in summer. As for the number of hours, 
the Punjab and the Sind Acts fix 54 hours a week for shops 
and commercial establishments, the Bengal Act 56 hours and 
the Bombay Act places a daily limit of hours fon shops and 
a monthly limit of 208 hours for commercial establishments. 
Ten-hour day is the maximum permissible for any establishment 
in. the Punjab. Overtime payment is at the rate of ll in 
Bombay and double in Bengal, Sind and the Punjab. The 
employees are to get one weekly holiday in Bombay, the^ 
Punjab and Sipd and days in Bengal. Also, .the shops' 
must , close for a day in the week in the Punjab and l| days 
in Bengal. In the Punjab minimum age for employment in 
a commercial establishment is 14, and in case of apprentfces 
12. Payment pf wages must be made in the Punjab within 
a fortnight of the end of the wage period and within 10 
days in Bengal. There is no such provision in Bombay and 
Sind. Again, while Bombay makes no provision for leave' 
with pay, the Punjab provides for 14 days' leave for a year's 
and 7 days for six months’^ continuous service, Bengal for 14 
days with the right to accumulate up to 28 days plus casual leave 
on ^ half pay for' 10 days, and Sind 15 days in a year- with“ 
no right to accumulate. The Punjab Act limits the total fine 
to be imposed to 3 pies in the rupee and provides for one- 
month's notice or one month's pay in lieu thereof for termi- 
nation of services on both sides. No other province .has any 
such provision. • / 

' - . ^ 
The second session of Labour Ministers/. Conference felt 
that it was necessary to provide for a weekly holiday to the ' 
shop employees on an all-India basis. Accordingly, . Weekly 
Holidays Act, 1942, was passed giving the Provinces having no 



INDUSTRIAL LABOUR 


345 


such legislation, an option to apply it. The Act merely provides 
for a weekly holiday in certain classes of establishments and 
that such establishments must close for one day in the week* 

14. Labour Legislation for Transport Workers. 

Railway 'Workers . — ^The employment in the railway workshops 
was regulated by the Indian Factories Act, 1922. But rue 
railways constitute a big employer of so many other classes 
of people for which there was no provision. But in 1930 
Indian Railways (Amendment) Act was passed which gave effect 
to the International Labour Conventions ratified by the 
Government of India about a decade ago with respect to railway 
employees. The Act provides for a weekly rest of full 24 hours 
and for a 60- hour week. But for the employees whose nature 
of work is intermittent the maximum is 84 hours a week. In 
case of emergency or exceptional pressure of work exemptions can 
be granted and in the case of the latter overtime shall be paid. 

Maritme Workers. These workers are covered by the Indian 
Merchants Shipping (Amendment) Act of 1931. According to 
this Act, young persons below a certain minimum age cannot be 
employed as trimmers and stokers. An indemnity has to be paid 
if the ship is lost or founders. Young persons employed at sea 
must be medically examined. There are several other provisions 
to protect their rights. According to Indian Ports Acts of 1922 
and 193], children under 12 are not to be employed to handle 
goods in ports. In case of accidents in loading and unloading 
for goods, the dockers are protected by the Indian Dock 
Labourers Act, 1934. 

15. Relief to the Indebted Workers. Royal Commission 
on Labour had made several recommendations in the matter. 
In pursuance of their recommendations, the Government of 
India amended Civil Procedure Code exempting from attachment 
a salary below a certain limit. An experimental measure was 
passed for Delhi Province abolishing arrest or imprisonment for a 
debt for all those who were getting less than Rs. 100 per month. 
On the suggestion of Government of India, Workmens 
Protection Act was passed in Bengal in 1934 which makes it a 
criminal offence to beset a factory for collecting a debt. 
This will prevent the harassment of a debtor by his creditor. 
Such legislation is being contemplated in some other provinces 
too. 

Id. Uniformity in Labour Laws Essential ; Each Ministry 
under ' Provincial' Autonomy, in its zeal to improve labour 
■conditions, prepared independently its own programme of labour 



346 '^ 


ECONOMICS OF INDIA AND PAKISTAN 


legislations It was feared that unco-ordinated labour laws 
imposing unequal financial burdens on industry and creating 
different conditions of work in different Provinces might weaken 
the competitive strength of industries in certain Provinces as 
compared with others* Also, that, as a result of this unequal 
treatment and conditions, industries might migrate to areas less 
suitable for the purpose simply to avoid rigorous labour laws, - 
Witii a view to ensuring uniformity in labour laws, a conference 
of Provincial Ministers of Labour together with representatives 
from Indian States has been convened by the Government of 
India every year since 1940* The employers too held a 
representative meeting in September 1941* As a result of these 
deliberations, a tripartite conference consisting of the representa- 
tives of State (Government of India, Provincial Governments - 
and State Governments^ the employers and the employees was 
held in 1942* A Standing Advisory Committee consisting of . 
these three interests has been set up to advise the Government • 
of India on matters concerning labour. 

17. Some Gaps in Indian Labour Laws ; Although since 
the Royal Commission on Labour reported there has been 
increased legislative activity in the sphere of industrial labour, 
yet there are- still important gaps which need filling up* The 
measures enacted so far cover only a small percentage of the 
total number of workers engaged in .the. various branches of 
industry. There is an immense number of small establishments 
where sweating labour conditions prevail and the workers there 
have yet no protection of the^ law. In C.P., however, the 
Unregulated Factories Act, 1937, seeks to regulate the labour of 
women and children and to provide for labour welfare in 
factories not covered by the Factories Act, Besides, while every 
other country has adopted social security measures and makes ’ 
provision against sickness, unemployment old age, and poor 
relief, there is no such provision in India* ^ The other countries 
have decided even to go further after the war, but the future of 
our labour is yet as “gloomy as ever. England, Canada and U.S.A. 
have ^ prepared far-reaching social security schemes. The U.SiA.' 
scheme has been described as ' a ^ breathtaking ’ one and the ’ 
expenses are expected to amount to astronomical figures. It is 
necessary that some measure, however modest, of social security 
should also be provided for Indian labour. - 

Dr. Ambedkar referred while presiding over the 7th Labour 
Conference held <in November, 1945, to State’s pbhgation to' 
lafepur* India has yet to. ratify 49 out of 63 donventions adcipted 
by thejnternational Labour Coriference. 



INDUSTRIAL LAITOUR 347 

18. Industrial Peace and Machinery to Secure it: For 
Industrial progress and prosperity maintenance of peaceful 
relations between labour and capital is of the first importance. 
Industrial conflict means a loss both to the employers and the 
employees even .when the latter score a victory, and is harmful 
to the community in general. Therefore, every effort is 
made in advanced countries to see that industrial peace is not 
disturbed. 

For a long time in India conditions of industrial unrest did 
not exist. Although modern industry began to grow in India in 
about the middle of the last century, yet for nearly half a century 
no dispute of importance took place. Whenever a dispute did 
take place, the employers came out invariably victorious. They 
were all-powerful and they could easily import ‘ black legs ’ in 
.case the workers ‘downed’ tools. The workers, on the other 
hand, were hopelessly unorganized and absolutely inarticulate. 
The use of strike as a weapon to fight the capitalists was 
unknown. It was only in the present century that the workers 
became class-conscious, but even then up to 1919 the disputes 
between labour and capital were sporadic. 

During the World War I there was intense industrial activity 
and abnormal profits were earned* Thirteen jute mills declared 
■ dividends of more than 200 per cent. To take the fullest 
advantage of the war opportunity, the factory owners clamoured 
for exemptions from the operation of the Factory Acts. But by 
‘ this time workers had become vocal. They were no longer 
dumb-drivea cattle. They were conscious of their rights and 
were prepared to fiight for- them if necessary. The influenza 
epidemic of 1918 which took a toll of about eight million people 
thinned their ranks and gave them an opportunity for which 
they were waiting. The year 1919 saw the outbreak of 
industrial strife on an organized scale. Concerted strikes took 
place in textile mills in Bombay, Ahmedabad and Cawnpore. 

The post-war boom was short-lived and by the end of 1922 
there was an acute depression. Wages were found to be higher 
than the pre-war level. A move to make a cut in 1923 in 
Ahmedabad led to a big strike. Bigger strikes came in 1924. A 

• committee presided oyer by Sir Macleod, Chief Justice, Bombay, 

* came to the conclusion. that the dearness allowances and bonuses 
. granted during the war were no longer justified and gave their 
.verdict against the workers. The year 1925 was still worse. 
Ajnioye. to inake a wage .cut of 12^% le4 to a general strike 
lasting for two months in which the workers put up stubborn 



348 


ECONOMICS OF INDIA AND PAKISTAN 


resistance against an attack on their wages. Both sides were 
adamant for some time, but the employers gave in when the 
Government suspended the Cotton Excise Duty. This was the 
first great victory for the workers. There was a loss of 12.6 
million working days in 1923. The next two years were 
relatively calm, but both sides seemed to be quietly consolidating 
their positions. In 1928 there was an outbreak of indur^^^s. 
conflict of unprecedented intensity. Revolutionary and 
elements had infiltered into the workers’ organizations'" pledged 
to destroy the existing capitalistic structure, and they preached 
class-hatred and often engaged in subversive activities. When 
the Sassoon group of mills introduced some measures of 
* rationalization’ to improve mill efficiency by asking the workers 
to mind more machines, opportunity was taken to declare a 
general strike. All mills in Bombay were affected and stopped 
‘ work for more than six months. There were other strikes, too, 
in some railways, at Jamshedpur, Sholapur and Cawnpore. In 
all, there were 203 disputes in the year involving 506,850 workers 
with a loss of over 31 million working days. The workers 
demanded the appointment of an impartial committee and 
they called off the strike when the Fawcett Committee was 
. appointed* 

' As a means of dealing with such disputes, a Trade Disputes 
Act was passed in 1929 and some amendments therein were, made 
in 1934 and 1938. Any dispute or apprehended dispute under 
this, Act can be referred to a. Court of Inquiry or a. Board of 
Conciliation by Government of India, in case of railways or 
concerns under Central Government, and by Provincial Govern- 
ipents when the concerns fall under their sphere. The Court of 
Inquiry was to be composed of an independent Chairman and 
other independent persons or only one independent person. The 
Court is asked to investigate and report. The report is published 
to focus public opinion which may influence the parties to the 
dispute to come round. The Board of Conciliation is to consist 
of one independent chairman and two or four other members 
representing equally both the parties and nominated by them* 
The Board tries to settle the dispute. The verdicf of these 
bodies may not be accepted by the parties, although they are 
expected to do so. There are special provisions relating to public 
Utility services, /.e., post and telegraph, railways, tramways or 
undertakings supplying water, light, etc. For the employees of 
such services to go on a strike without giving 14 days’ notice is .a 
penal offence. It provides for the appointment of Conciliation 
Officers to promote, the settlement of a dispute. Strrikes and 



-INDUSTRIAL LABOUR 


349 


lock-outs- which are calculaced to inflict severe and general 
hardship on the community and are declared for a purpose other 
than or in addition to the furtherance of a trade dispute in the 
industry, are illegal. Punishment is provided for those who join 
such illegal activities, and protection from union disabilities to 
those who refuse to join them. 

In again there was a general strike lasting for about six 
monthJ Involving over 109,000 workers in 62 mills and resulting 
in a loss of 7 million working days. The years 1928 and 1929 
were the worst. They alone accounted for a loss of 43 8 million 
working days as against 40.4 million days in the preceding seven 
years and 16.7 million in the subsequent seven years. Under the 
- Trade Disputes Act, 1929, a Court of Inquiry was appointed with 
Justice Pearson as the Chairman. The Court put the whole 
blame on Girni Kamgar Union. Between 1930 and 1933 com- 
parative calm prevailed on the labour front in India. As the 
economic depression deepened there was a general movement to 
cut down wages, but as there was widespread unemployment, 
labour did not show any serious opposition. 

As a result of the Report of the Departmental Enquiry, insti- 
tuted by Bombay Labour Office, a. Trade Disputes Conciliation Act 
was passed in Bombay in i934- It provided for the appointment 
of a Labour Officer to look after the interests of the workers in 
cotton mills and to represent their grievances with a view to 
. getting them redressed. There was also a provision for the 
appointment of Commissioner of Labour to act as an ex-officio 
.Chief Conciliator in cases where the Labour Officer did not 
succeed. In actual practice he was treated as a judge whose deci- 
sions were geherally accepted. The Act remarkably succeeded 
in slowing down the tempo of industrial strife in the Province. 

, The years 1934-36 were, therefore, comparatively free from indus- 
trial conflicts. 

But the inauguration of Provincial Autonomy saw the 
recrudescence of industrial strife. The coming into power of 
popular Ministries raised high hopes among the workers who 
thought that the time had come when all their grievances, real or 
imaginary, would be redressed. In three years 1937-1939, there 
were 1,184 disputes as against 1,039 in seven years since 1930. 
The disputes now were more frequent but less protracted as com- 
pared with those in 1928 and 1929. Between 1937 and 1939 there 
was a loss of 23.2 million working days. 

In 1938 in Bombay was enacted the Bombay Industrial Disputes 
Act which is a m'ost advanced piece of legislation on the subject. 



350 


ECONOMICS OF INDIA AND PAKISTAN 


According to this Act, strikes and lock-outs are illegal until the 
whole machinery for conciliation and arbitration of the dispute 
has been made use of. Conciliation will be attempted before the 
dispute occurs and not after. They employers must give notice to 
the representatives of the employees of any changes they propose 
to make in wages, hours of work, conditions of employment, etc. 
They have also to submit a draft of the standing orders which 
they propose to adopt and these will be settled by theS Commis- 
sioner of Labour after consulting all concerned. No%nange is 
then permitted unless a due notice is given td the employees who 
also have to give notice to the employers in case they desire any 
change. According to the Act, unions recognized by the 
employers or those which have a certain percentage of the persons 
engaged in the industry as their members can be registered so' as 
to be able to act as. representatives of the employees. In the 
absence of a recognized union, the Labour Officer or the directly 
elected representatives of the workers will conduct the negotia- 
tions. All the agreements arrived at as the result of conciliation 
have to be registered. Besides the appointment of conciliators 
and Board of Conciliation, the Act also provides for the setting 
^up of - an’ Industrial Court with a High Court Judge as its Chair- 
man or a lawyer who is eligible to be a High Court Judge. The 
Court will arbitrate on matters connected with a' dispute and act 
as a final court of appeal on various matters arising out of the 
working' of the Act and interpret agreements, awards, etc. The 
Act was bitterly criticized by some labour leaders as seriously 
affecting the right of labour to strike. But the Act simply asks 
therh to 'wait and see if the dispute cannot be settled in a 
peaceful manner. In case they fail in this, they can go on a strike. 
The Act is based on the idea of collective bargaining, but 
' it does not seek to provide any internal organization to 
' ensure smooth and peaceful relations between the employer and 
his employees. 

After the outbreak of the World War II several strikes occurr- 
ed, The workers put up claims for a share in abnormal war 
profits. There was a general, strike ip ^cotton mills in Bombay 
city in 1940 and a dispute in, 1941 in Ahmedabad,,and a jatge 
.number of disputes all over India in 1942 on the question 
of a war bonus and on account of political disturbances. Btit 
their demands for dearness allowances, and war bonu^^es were 
readily conceded. In this nation-wide expansion „of industty> 
there was work for everybody. There was a keen demand 
for labotir. Labour grasped this opportunity with both hands 
and made the most of it by a strong and concerted action. ' 



•INppsTRX^L LABOUR 


351 


In 1944 there were 658 industrial stoppages in British India 
involving 5,50,015 workers* The total number of mandays lost 
was 34,47,306. 

Lest it should affect the war effort it was felt necessary to 
devise some machinery to a\''oid strikes and lock-outs. With 
this object in view Rule 8 LA of the Defence of India Rules was 
issued in January, 1942. This rule was supplemented by two 
notifications issued on 12th March and 20th Miy, 1942, According 
to this rule as supplemented above, the Central Government and 
Provincial Governments had the power to issue an order 
prohibiting strikes and lock-outs, requiring employers to observe 
certain conditions of employment, referring to the Government 
a dispute for conciliation or adjudication and enforcing t|he 
award of the authority to which the dispute was referred. « 

By virtue of this rule a General Order was issued by the 
Government of India on 6th March, 1942, pronibiting the 
workers in any undertaking from going on' a srjke unless they 
gave 14 days’ notice within one month before striking. This 
order also provides that when a dispute has been referred 
for conciliation or adjudication, no strike is permitted until 
after the expiry of two months after the proceedings have 
finished. 

Essential Services (Maintenance) Ordinance^ 1941 : Under this 
Ordinance, the Central Government can declare a work in any 
undertaking as an ^ essential ’ service.. In the case of that service 
the, workers cannot, give up employment, and they can be 
punished if they .disobey any lawful order, the order not to 
strike being a lawful. order. In such undertakings the Govern- 
ment is empowered to .regulate wages and other conditions of 
employment, . 

19; Labour Movemeat in * India : Labour movement in 
India is still in its infancy. It was very slow in developing and 
up to the end of the Wardl914-18) Indian labour was practically 
unorganized. , In 1875 Mr. Sorabjee Shapurjee Bongali drew t^. 
attention of the Government to the miserable lot of the labourers., 
But the .first important step towards organizing labour was taken 
by Mr. Lokhande in connection, with the agitation for the 
amendment of the first Factory Act. He prepared a memorial 
signed by 5,500 workers and organized a mass meeting in Bombay 
attended by 10,000 workers.’ H^'.alSo laid the foundation in 1890 
of the first organizatioh 6f Hbour; viz*, the Bombay Mill Harids 
Association. But it was a loose Organization formed simply for 
presenting a memorial to Government. The Amalgamated Society 



352 


ECONOMICS OF INDIA AND PAKISTAN 


of Railway Servants of India and Burma was formed jn 1897 witk 
functions more fraternal than militant. Of the other organiza- 
tions formed in the beginning of the present century, mention 
may be made of Printers’ Union, Calcutta, 1905, Bombay Postal 
Union, 1907, and the Kamgar Hitwardhak Sabha in 1910. This 
the latter was composed of a body of social workers to plead 
the cause of workers. It was for them and not of them. 

The World War I was responsible for mass awakening. Seeing 
that the capitalists were reaping a rich harvest of war profits, the 
workers wanted their own share, especially when the cost of 
living had gone up very high. Discrimination against Indian 
labour in the colonies, the growth of Indian national movement 
and" a Revolution in Russia were also some of the factors that 
gave a fillip to the Indian labour movement., New ideals came to 
be preached and new aspirations cherished. A spirit of defiance 
was abroad. ‘ With the social mind surcharged with war spirit, , 
political agitation and the revolutionary ideal, the labouring 
classes could no longer remain patient and tolerant under the old 
social wrongs andi new economic disabilities.’ **• The credit of ' 
forming the first industrial union belongs to Mr. Wadia who 
organised in 1918 the textile workers at Coolai in Madras and ' 
next year the number of union's rose to four with 20,000 members. ' 
Other industrial centres followed suit and formed organizations 
of local workers. Between 1919-1923 scores of unions came into 
existence, Mahatma Gandhi in 1920 formed at Ahmedabad 
Spinners’ Union and a Weavers’ Union and by the middle of‘ 
1921 trade unions had 20,000 members with funds amounting to 
Rs. 75,000. These early unions were, however, mere strike com- 
mittees and evaporated as soon as their demands were fulfilled. 
They seldom gave notice of a strike, could sometimes hardly for- 
mulate any grievances and would often shift their ground or put- 
forward extravagant claims. Further, the unions were isolated 
from one another without any solidarity among them. 

Soon a movement for co-ordination set in. The necessity of 
electing delegates for the Annual International Labour Confer- 
ence gave some impetus to this movement. The, local unions 
were federalized, and then Provincial Federatipns came to be 
formed. The first All-India Trade Union Congress“^a national 
federation of all unions— was held in 1920, 

In the well-known case of the Buckingham Mills in 1920, the 
Jyfadras High Court issued an injunction against the Madras' 
Labour Union for inducing workers tp go on^ a strike. This 

1. Das, Labour Movement In "India, 1923;“ p: ‘25;* 



INDUSTRIAL LABOUR 


353 


was a bolt from the blue, for the- Labour leaders suddenly 
“discovered that they could be prosecuted for bona fide trade 
union activities. After about ^five years' efforts, the leaders 
succeeded in getting the Indian Trade Unions Act of 1926 
passed. This Act lays down certain conditions regarding registra- 
tion of a union. For example, 50% of the members of the 
executive committee must be employed in the unit or units 
covered by the union. In Sind, according to an Act passed in 
1942, the proportion is two^thirds. Further, their rules must 
provide for certain necessary matters. Subject to this, any seven 
or m^re members can apply for registration. No person under 15 
can be a member of a union. Registration can be cancelled in 
case of non-compliance with the provisions of the Act. The 
registered unions are not allowed to use their funds for political 
purposes, although they are permitted to have separate political 
runds to which the subscription is purely voluntary. The purposes 

which the funds can be spent have been definitely laid down* 
They are also required to submit annually an audited statement 
of accounts, a copy of the rules and a list of the officers and 
executive committee. They have also to provide for the inspec- 
tion of books. But the Act confers on registered unions certain 
rights and privileges. They enjoy immunity, both civil and 
criminal, from prosecution for their activities connected with 
the furtherance of a trade dispute. As a result of the deli- 
berations of the 7th Labour Conference held in November, 1945, 
it has been decided to amend this Act and place the Trade Union 
Movement on a better footing. 

In the beginning the unions were slow to register themselves 
for there were practically no prosecutions after the Buckingham 
Mill case and the unions were unwilling to undergo the expense 
of registration and inconvenience of submitting annual returns. 
But this inertia was soon overcome and registration proceeded 
apace. The attitude of the employers using non-registration as 
an excuse for not recognizing a union also accelerated the move- 
ment for registration. 

In 1928-29 communists and left-wing radical leaders captured 
the key positioils in Trade Unions. Their Girni Kamgar Union 
in Bombay succeeded in enrolling 50,000 members. The member- 
ship of the unions all over India mounted up. But the subversive 
activities of this extremist element led to the arrest of 31 ring- 
leaders who were tried in the famous Meerut Trial. But rioting 
and lawlessness continued. As the result of the report of the 
Court of Inquiry in 1929, which held the Girni Kamgar Union 
solely responsible for such violence and disturbances, the Trade 



354 ' ECONOMICS OF INDIA AND PAKISTAN 

Unionism in India was discredited. When the radical 'wing 
captured the Alhindia Trade Union Congress in its tenth session 
held at Nagpur, in 1929, the moderate elements under Mr. N. M, 
Joshi seceded and formed the AlUndia Trade Union Federation, 
This split seriously weakened the Trade Union Movement in 
India. In 1931, there was a further split when extreme left wing 
leaders Deshpande and Randive formed the AlUndia Red Trade 
Union Congress. All interested in labour welfare deplored this 
split. But although efforts at compromise were started in 1931, 
when a Trade Union Unity Committee was formed which put 
forward a ‘ platform of unity yet the gulf was really bridged in 
1938 through the efforts of Mr. Giri, Minister of Labour in the 
Madras Government. The provisional agreement was finally 
ratified in 1940. But the outbreak of war led to some secessions^ 
the difference centring round the question of the war effort.. 
The Trade Union Congress adopted an attitude of neutrality, 
although the members were granted freedom of action. Dr. Aftab 
Ali, President Seamen’s Union, did not like this lukewarm attitude 
and wanted to support the war effort., His union therefore’ 
seceded. The ‘Rbyists’ who were in favour of an alLout support • 
for the war effort, formed their own organization, the Trade* 
Union Federation with Mr. Jamnadas Mehta as the President, and' 
Mr, M, N. Roy, as the Secretary, To this organization 200 unions’ 
with a quarter million members got affiliated. Besides the ‘ Royists * 
another important group outside the Trade Union' Congress is 
the Hindustan Mazdoor Seva Sangh, an organization ‘which aims 
at organizing labour on the lines laid down by Mahatma Gandhi, 

According to the Constitution of 1935 registered unions 
have to serve as a constituency to return labour representatives 
in the Provincial Legislatures. This has served' as an incentive^ 
for the registration of unions. Even the Textile Labour Associa- 
tion, Ahmedabad, which is the best, the largest and most highly 
organized union and which had stood' aside on political grounds* 
has also got itself registered. ^ Since the passing of the Trade * 
Unions Act in 1926, there has been a considerable growth in the* 
number of registered trade Unions which was 29 in 19iJ7^28 and 
666 in 1939-40, of these latter 450 unions, which furnished 
returns had more than 500,000 members of whom only 3 per cent, 
were Women, and they had an income amounting . to Rs, 11,22; 
lakhs. At the etid of the year 1941, there were 750 unions with, 
a membership of nearly 650,000,. . . . : 

The Trade Union Mbveraent in India ha^ made remarkable^ 
progress in less than a generation.’ In fev^ other countries* such 
.a rapid progress has been shown in so short a time. The move--* 



INDUSTRIAL LABOUR 


355 


merit is fairly widespread and the Trade Union idea has taken 
deep root. The unions are no longer mere strike committees. 
They are now better organized having an office and duly elected 
office-bearers and are more permanent in character. They have 
acquired a following and a prestige and wield ,an influence which 
cannot be described as negligible. They have a fairly large number 
of successes to their credit and have undoubtedly succeeded in 
wresting important concessions and improving the working con^ 
ditions. Leaders like Mr. N. M. Joshi, and Mr. Gulzari Lai 
Nan da will do honour to any labour organization in the West. 
The International Labour Conventions drafted every year, the 
press and the public opinion and the Indian national movement 
have all contributed to the growth and strength of the Trade 
Union Movement in India. 

But our Labour movement cannot claim to have come as yet 
even near the standards long ago attained in the West. The 
Trade Unions in India can yet cMm as members only a small 
fraction of the total strength of the industrial force. Hardly 5 

- per cent, of our industrial labourers have yet joined the unions ; 
the corresponding figure in England is 90 per cent. Few labour 
leaders have risen in India from the labour ranks. Most of the 
leaders are' ' outsiders, lawyers and other < professional men or 
politicians'; The funds at their disposal are meagre and they 
cannot afford to support the workers on strike. Few unions pay 
unemployment, sickness and old-age benefits. Not many unions 
do any welfare work. Their fraternal or “ mutual-help side is 
practically undeveloped and they, have confined their activities 
almost exclusively to the militant functions, r.e., getting their 
grievances redressed and formulating demands for higher standards 
and better conditions. The Textile Labour Association of 
Ahmedabad is an honourable exception and is doing very credit- 
able welfare work. According to its report for 1,936-37, it 
treated in its well-equipped hospitals 703 ■ indoor patients and 
49,176 day-patients. It ran 22 schools having 1,667 students, spent 
nearly Rs. 41,000 on educational work. They p^id during the 
previous 10 years Rs. 45,000 as victimization, benefits. 

There are certain handicaps from which the trad^ union 
movement in India suffers. The labourers arc illiterate,' ignorant 
and migratory without any permanent interest in itidustry. They 
are finwilling to submit to discipline and unable or reluctant to 
pay subscriptions. Diversities of language, religion and caste and 
being drawn from distant and strange places with their different 
social customs and habits are serious obstacles in building up 

- labour golidarityv , . Their low wages keep them down. Long 



356 


ECONOMICS OF INDIA AND PAKISTAN 


hours of work do not leave any energy in them to take interest 
in the union activities. In the depressed conditions that our 
labour is in, it is idle to expect them to think of union politics. 
The hostility of the jobbers and the employers has been another 
stumbling-block. The leaders have sometimes been opportunists 
and have had their own axe to grind. They often quarrel among 
themselves, holding divergent views and labour has been not 
infrequently exploited. Leadership must be developed from 
within the labour ranks if the movement is to be placed on 
a stable footing. It is hoped that as workers with education and 
intelligence join the factories, it will be possible to do these 
things. The employers must also adopt a more sympathetic 
attitude and be easily accessible to their workers. They must 
realize that only a strong labour union can guarantee industrial 
peace. 

SOME OTHER PROBLEMS OF LABOUR 

20. Hours of Work : Broadly speaking, the working hours 
in the seasonal factories are limited to 11 hours per day and 60 
hours per week and as for the perennial factories the limit is 10 
hours a day and 54 hours a week. But the actual hours worked 
vary from industry to industry and even in different concerns in 
the same industry. In the mines the weekly hours range from 
38 to 51. The textile mills all over India work for 9 hours per 
day and in some cases a little more when Saturday is a half-holi- 
day. Recently the relay shift system has been introduced where 
the workers are given rest by turns*. The Sassoon group of mills 
for the last 6 or 7 years have been working on the basis of three 
shifts of 7 hours each. In order to fill up the gap caused by 
reduction of imports and to meet increased home demand the 
cotton spinning and weaving mills have been permitted, by 
virtue of a press note issued in November, 1941, to work for 60 
hours per week. In the jute mills, according to an agreement of 
March 1939, the hours were ordinarily limited to 45 which can 
be reduced to a minimum of 40 by 75 per cent vote or increased 
to a maximum of 54 by 51 per cent, vote. There was a provision 
in the agreement for an increase in the hours in case of a boom or 
war. The actual working hours, therefore, varied from 54 to 60 
hours per week. Munition factoriesi oil and sugar mills work for 
the full time permitted under the Factory Acts. Where con- 
tinuous working is essential, e.g., in electric generating plants, 
there are three shifts. The big railway workshops also work three 
shifts of 8 hours each and smaller ones 60 hours a week where 
the work is continuous and 84 hours a week where it is inter- 
mittent. There is no legal restriction on the. working hours of 



INDUSTRIAL LABOUR 


357 


dock labourers and their hours vary from 9 to 11 hours per day. 
Reduction of hours in the regulated factories has also influenced 
the unregulated ones in bringing their hours to more normal 
standards. Experience has fully justified this reduction. Work- 
ing hours can still be further reduced without curtailing the 
output or adversely affecting the industries in any manner but to 
the great advantage of the workers. It will have a salutary effect 
on their health and efficiency from which the industry in the 
long run is sure to benefit. The Labour Conference held in Novem- 
ber 1945 unanimously supported 48-hour week. 

21, Factory Discipline The Indian labourer is said to be 
least disciplined, incapable of continuous and sustained work and 
fond of loitering ana having a holiday, so that the degree of 
absenteeism and turnover is very high indeed* But for this the 
worker is not entirely to blame. The employers have adopted a 
wrong remedy to cure the disease. They have tried to enforce 
discipline by inflicting monetary punishments in the form of fines 
and deductions from wages which are now regulated by the Pay- 
ment of Wages Act, 1937. The root cause of the trouble lies in 
low wages and unattractive and soul destroying conditions prev- 
alent in the factories, which compel the worker to seek a change. 
The investigations by the Labour Office of the Bombay Govern- 
ment have shown that the turnover is the highest where the 
wages ate the lowest and conditions of work least attractive and 
it is the lowest where these conditions are most favourable. As 
the result of the passing of Bombay Industrial Disputes Act 1938, 
a decision by the Industrial Court has resulted in the improve- 
ment of standing orders enforced in the textile mills in Bombay 
and these standing orders have been widely adopted by the mills 
in other centres. But unless there is a marked improvement in 
the conditions of work and employment, the factory-owners will 
have to complain of lax, discipline among the factory operatives. 

22. Industrial Safety, In spite of the provisions of the 
Factory Acts and the Mines Acts and stringent factory inspection 
calculated to prevent or minimize the accidents, the number of 
accidents has been increasing at an alarming rate. There were 
44,821 accidents in 1943. It is said to be due to better reporting 
of accidents, marked expansion of industrial activity, fatigue and 
longer exposure to risk on account of longer hours and the 
employment of persons not used to such a type of work. It|is 
also* said that the increase in accidents is due to the inducement 
offered by the Compensation Act. But this is simply senseless. 
It is necessary to carry on a vigorous and country-wide “ Safety- 
First” campaign. The Safety-First Association of India, the 



358 


ECONOMICS OF INDIA AND PAKISTAN 


, Railway Administration and the Bombay Mills Association have 
' been carrying on “ Safety-First ” propaganda through cinema 
films^magic lantern lectures, holding “ Safety-First and first-aid 
classes and by putting up attractive posters in prominent places. 
-The Bombay Mills Association has issued a Safety-First Code. 
The larger concerns have instituted Safety-First Committees. 
It is hoped that this campaign will bear fruit and the number of 
accidents will diminish. But recently the situation seems to 
have deteriorated. As compared with 1942, there were 44 per 
cent more accidents in 1943. 

23 Industrial Health ; In physique and health, the Indian 
labour is definitely inferior to that of other industrialized 
countries. Adverse clirtiatic conditions, bad and insanitary 
housing and congestion, illiteracy, ignorance, fatalistic outlook 
and, above all, poverty are some of the chief causes of the 
prevalance of deadly diseases among the labour population, so 
that their health and vitality is at the lowest ebb. There' is 
almost a continuous cycle of ever-recurring epidemics.' The 
Punjab suffers most from tuberculosis, Bengal from malaria and 
kala-azar, Bihar and Orissa from beri-beri and so' on. Thefee 
' epidemics and diseases so undermine the physique and health of 
the Indian labour that hi^‘ efficiency is seriously impaired; The 
Labour Commission took a very serious view of the> matter* 
That is why the Factory Act of 1934 contains provisions for the 
safeguarding of the health of the workers and for the mainten- 
ance of sanitary and hygienic conditions in the factories. The 
factories have now to make arrangements for cleanliness, lighting, 
ventilation, water-supply for drinking and washing, adequate 
latrine accommodation, artificial cooling, whitewashing and 
disinfecting, removal of dust and dirt, for a standard space, 
accommodation for the residerice* of workers, etc.- Since the 
passing of this Act remarkable progress has been made' in these 
directions. The large industrial ,( establishment^^ maintain 
1 well-equipped dispensaries and hospitals ajttendcd^ by duly 
qualified doctors and nursing staff. The Proviiaciar Governments 
and the local bodies are also doing something to improve 
sanitation and to provide medical facilities. But such facilities 
cannot be described as fully adequate to meet the requirements. 
The public expenditure on health and medical aid. is still 
ridiculously small. With the present state oi^ health and 
physique of oiir workers, it is idle for us to compete in the 
ihdustrial race, 

24. Social Insurance : Almost all advanced countties ‘ Hive 
provided for iiisufance' against sickness and unemployment* and 



INDUSTRIAL LABOUR 


359 ^ 


have made arrangements for old-age pensions on a contributory 
basis, worker, employer and state each contributing. But 
in India, it remains still a far-off ideal in spite of the International 
Labour Conventions. adqpted in the matter. The matter relating 
to sickness insurance did at one time engage the attention of the 
Government of India. But on account of practical difficulties, 
administrative and financial, it did not appear to be feasible to 
introduce any form of social insurance. Sometimes the employers 
put forward the plea that the industry cannot bear the additional 
cost which such schemes must involve and that the workers do 
not like to contribute. There is not much substance in these 
arguments. Such costs should be considered as the essential costs 
and not the “ additional” costs and the industry must manage to 
bear this expense." "As for the workers, when they come to 
understand such schemes, they will be only too glad to contribi|te. 
This would help in building up a permanent wage-earning class 
and diminish absenteeism and turnover. Social insurance is long 
overdue and whatever difficulties have to be faced must be 
overcome in the name of humanity. Some large industrial 
concerns give small pensions for long and faithful service, but 
they are mostly ex gratia and cannot be claimed as a matter of 
right. Bengal is contemplating the introduction of old-age 
pensions for jute-mill workers. It is hoped that such legislation 
will be undertaken on an All-Pakistan basis. The Government 
of Indi^^has prepared a scheme of social insurance and obtained 
for the ^ purpose the assistance of two' experts from the Inter- 
national Labpur Office, in the persons of Mr. Stock and Mr. Rao* 

25^ Other Benefit Schemes and Financial Aids ; 

Grrttuft/es.--~-Gratuities are paid to railway servants and em- 
ployees of local bodies and larger puiblic companies subject to a 
specified period, of. approved service. Retirement Benefit schemes 
have been introduced by large industrial establishments like Lever 
Bros., and Tata Iron Steel Co. The Tata’s pay on retirement 
a gratuity equal to half a month’s salary of each completed year 
of unbroken service to all non-covenanted, permanent employees 
getting not more than.Rs. 500 p.m» 

• Pi^ovident Fundl-^Provident schemes on a contributory basis 
are nn operation in' Government Ordnance Factories and those 
owned by public bodies and railways and in large public utility 
services like Bombay Electric Supply and Tramway Company, 
Tata Electric Plants, etc.. Usually the employee contributes 1/20 
of his 'bay and the contribution of the employer varies from 50 per 
centj .to 100 p^r cept of ^vhat;'the employee contributes. The 



360 


ECONOMICS OF INDIA AND PAKISTAN 


employees can withdraw their own' subscription at any time 
on relinquishing their posts, but the whole amount including the 
employers’ contribution can be withdrawn only on the completion 
of certain specified period of approved service* 

Coroperative Societies , — ^Almost all large industrial concerns 
have now established co-operative credit societies for the benefit 
of their employees. The movement has made a remarkable pro- 
gress during recent years* In the Tata Iron Sc Steel Company, 
Jamshedpur, there were at the end of 1938, 26 co-operative 
societies with 11,582 members and Rs. 10,29,876 paid-up capital* 

WAGES AND COST OF LIVING 

26, Wage Hates and Earnings ; On account of the paucity 
of reliable statistical information about the wage rates no accurate 
and definite statement can be made on the subject. Government 
of India tried to institute a wage census in 1921, but the attempt 
was abandoned due to financial consideration* Only in Bombay 
the Labour Office has been conducting from time to time some 
inquiries into the problem. It conducted a general wage census 
m 1934, and a special inquiry into wages of the textile workers 
in 1937* In other provinces no exact information is available. 

Further, with the exception of Ahmedabad, where the 
wage rates are settled by negotiations between the, Textile Labour 
Association and the Ahmedabad Millowners’ Association, there 
is complete absence of wage fixing machinery or the union ” 
rates. No standardized rates prevail and each industrial unit 
arbitrarily fixes the various grades. Thus there are wide varia- 
^f wage rates from province to province and from industry 
to industry and even from one concern to another in the same 
industry. For each individual the wage is fixed by bargaining 
and may depend to some extent on personal competence or 
efficiency. Another thing worth noting is that there is no 
consolidated rate. War allowances during the first war were 
never completely taken away and continued as separate items 
Sven up to the outbreak of the recent war. 

The rates given below have been taken from the Indian 
Tear Book 1942-43 (p. 499) and are intended to give only a 
general idea about the earnings in some important occupations; — • 

^ . Period of Rates iii 

Occupation payment Cities Towns Mofussil 

Rs. Rs. Rs, 

Foreman, (European) ...Monthly 500 to 700 400 to 600 350 to 550 

Foreman (Indian; „ 250 to 400 J50' to 300 150 to Z50 

Chargtman „ 150 to 250 100 to 225 75 to 200 



INDUSTRIAL LABOUR 


361 



Period of 




Rates in 




Occupation 

Payment 

Cities 


Towns 


Mofussil 



Rs. 


Rs. 


Rs. 


Misfries 

» 

160 to 150 

80 to 110 

55 to 

90 

Steam Engine Drivers 


50 to 

75 

40 to 

70 

50 to 

30 

1st Class Boiler Attendants 

»> 

80 to 100 

65 to 

80 

50 to 

70 

Znd *, „ „ 

5, 

50 to 1 

SO 

45 

to 

60 

35 to 

50 

Foreman 

Monthly 

45 

0 

0 

35 0 

0 

30 0 

a 

Cabinet makers 

Daily 

4 

8 

0 


— 


— 


Carpenters, Isc Class 

i9 

3 

4 

0 

2 

12 

0 

2 0 

0 

„ 2nd Class 


2 

8 

0 

2 

0 

0 

2 0 

0 

Fitters, Linesmen 

ty 

4 

0 

0 

3 

4 

0 

2 8 

0 

„ Superior 


3 

8 

0 

3 

0 

0 

2 8 

0 

„ Ordinary 

„ 

2 

0 

0 

1 

8 

0 

1 4 

0 

Mechanics Superior 

>» 

4 

0 

0 

3 

4 

0 

— 


„ Ordinary 

>s 

2 

8 

0 

» 2 

0 

0 

I 12 

0 

Blacksmiths 

), 

2 

12 

0 

2 

4 

0 

1 12 

0 

Hammermen 

S) 

1 

8 

0 

1 

4 

0 

I 0 

0 

Pattern makers 

9t 

4 

0 

0 

3 

0 

0 

2 8 

G 

Moulders, Superior 

if 

3 

4 

0 

2 

12 

0 

2 4 

0 

„ Ordinary 

f* 

2 

0 

0 

1 

12 

0 

1 6 

0 

Rivetters 

,, 

2 

12 

0 

2 

4 

0 

1 12 

0 

Welders 

ft 

3 

0 

0 

2 

8 

0 

— 


Masons 

ft 

2 

0 

0 

1 

8 

0 

1 4 

3 

Cobblers 

it 

1 

8 

0 

1 

4 

0 

1 0 

0 

Mechanic’s Assistants 

a 

1 

8 

0 

1 

4 

0 

C 14 

3 

Weight Lifters 

tt 

1 

4 

0 

1 

0 

0 

0 14 

0 

Semi'skilled workers (all 










occupations) 

»♦ 

1 

8 

0 

1 

2 

0 

0 14 

0 

Unskilled workers 










(all occupations) men 

if 

1 

4 

0 

0 

14 

0 

0 12 

0 

„ women 

tt 

1 

0 

0 

0 

10 

0 

0 8 

0 


According to the General Wage Census taken in Bombay in 
1934 , the daily earnings of adult workers in cotton mill-industry 
were; — Bombay City Re* 1-1-10; in Ahmedabad Re. 1-5-7 ; in 
Sholapur Re* 0-11-8* The monthly earnings in engineering and 
other skilled occupations were : Bombay Rs. 4T8-5 ; Ahmedabad 
Rs. 33-7-4 ; Sholapur Rs* 22-1-4. The average monthly earnings 
in the jute industry in Calcutta are said to vary between Rs* 10 
for a bobbin cleaner to Rs. 40 or 50 for a metal turner. The 
average monthly earnings of a family in tea plantations vary from 
Rs. 15 to Rs. 30. In the coal mines the undergroufid workers’ 
daily earning on average are : loaders 8 as. to 12 as* ; miners 10 
as. to Re. 1 and foremen 12 as. to Re. 1-8-0. On account of 
dearness allowances the earnings are today much higher. But the 
increase is neutralized by increase in the cost of living. The scales 
of earnings prevalent in Indian industry are hardly enough for 
an average working class family to make both ends meet. Only 
a considerable rise in wages can improve labour eificiency. 



362 


ECONOMICS OF' INDIA AND PAKISTAN 


27. Some Objections to Increase of Wages answered : It is 

sometimes argued that increase in wages will be squandered away 
in drink and other ill-advised expenditure or that it will induce 
the worker to have some holiday and thus add to the already 
high degree of absenteeism or that it will be ' neutralized by 
increase of population. Further, that a higher scale will be 
beyond the capacity of the industry to bear so that the country’s 
industries will be beaten in international competition. But these 
arguments cannot stand even a cursory scrutiny. No doubt a 
sudden and large increase in earnings may result in some foolish 
expenditure. But if the higher scale is maintained this folly 
will be only a passing phase and if the increase is gradual there 
will be no danger of foolish expenditure at all being indulged in. 
It will lead to improviment in standard of living and the desire 
to maintain that standard will keep the population down. It is 
too late in the day to appeal to exploded theories of population 
or wages. To say that increase in wages will lead to off-days is to 
misunderstand the psychology of labour, for it means the satiety 
point with respect to earnings has already reached, which is 
simply ludicrous. As for the industry’s capacity to bear the 
proper scale of wages, it may be said that if the industry can 
only survive when labour js exploited, the sooner it goes down 
the better. To expect the weak shoulders of the worker to prop 
up such an industry is inhuman and detrimental to the nation at 
large. ■ An efficient management can surely make several other 
economies and a temporary difficulty of an industry in the' inter- 
national competition can be overcorhe by other means of 
protection and aid. - But it should never look to sweatings of 
labour as a means of survival. Sweating of labour in the long 
fun will hardly pay. All objections to the increase of wages 
must be brushed aside and the industrialists must be brought 
found to s6e the sense and justice of increasing wages. Only 
then the quality of the human factor will improve and this is 
indispensable to any real and substantial progress in industry. 
Not much can be accomplished by weaklings, invalids and illite- 
rates. ' ' ' ' 

28. Legal Minimum Wage : It'is recognized in all advanced 
countries that it 'is desirable ’ tP maintain certain minimum 
standards of life anidthat every individual rnust be in a position 
to 'satisfy certain minimum needs. Thus minimum wage-fixing 
machinery has been set up to provide for a minimum wage 
particularly in “ sweated ” trades where the workers are hopelessly 
unotgahized and are therefore in a helpless condition, and 
where through collective bargaining the interests of the workers 
cannot be properly safeguarded. The International Labour 



industrial LABOUR' 


363 


Conference held in 1928 adopted a convention in this connec- 
tion* The Royal Cominission on Labour, in India also suggested 
an investigation into the feasibility of setting up a minimum 
wage fixing machinery. The Bombay Textile Labour Enquiry 
Committee in 1937 was also asked to go into the question. No 
forward step in this direction has been taken so far in India. 
The Indian National Congress, as shown by its election manifesto, 
seemed pledged to the principle of a basic or minimum wage. 
The Cawnpore Labour Enquiry Committee appointed by the 
Congress Ministry did recommend a minimum wage of Rs. 15 
p.m. Soon after that all the Congress Ministries' gave 
up the reins of office, otherwise something would have 
been done in the matter by this time. No doubt that in view 
of the traditional tendency of the employers to evade Labour 
laws and the ignorance and illiteracy of the workers, there will 
be immense administrative difficulties and costs, yet every effort 
.should be made to overcome these difficulties to ensure at least 
a minimum standard of life to the workers. The employers 
need not be unnecessarily apprehensive. The minimum fixed is 
generally such that even the weakest concern can pay. It is 
time that a minimum wage be provided, for such reforms are 
long overdue. . 

Dr. Ambedkar, the Labour Member of the Government of 
India, announced in the Labour Conference held in November, 
1945 that a committee of two representatives of the workers 
■and two of the employers would be formed to advise the Gov^ 
.ernment in drafting legislation for minimum wages. ^ 

29, Wage Periods : There is no uniformity as regards the 
periods of wage payment. The period varies widely in different 
branches of the industry and in the same industry from one 
district to another and sometimes in the same concern, the period 
differs for different group of workers. It is very difficult, there- 
fore, to generalize. Subject to these remarks it -may be stated 
that the payment is 'made weekly in jute mills, coal mines, tea 
plantations, seasonal factories,- oil mills, rice and flour mills, etc. 
At Ahmedabad the wage period is 14 days for weavers 
and 16 days ffor spinners and at Broach it is a fortnight. 
Monthly system ^ of- payment - prevails in cotton mills - in 
•Bombay, Sholapur.and several other centres, engineering work- 
shops, dockyards and in mechanical supervisory and electrical 
departments of all industrial concerns. In sugar mills and 
tanneries, both monthly and fortnightly systems prevail. The 
Tata Company .at Jamshedpur pays weekly to workers on daily 
rates and monthly to those pp monthly rates. The casual labourer 



364 


ECONOMICS OF INDIA AND PAKISTAN 


is paid on the daily basis. In view of the fact that rent payments 
are made monthly and there is a practice of settling bills every 
month, the workers seem to prefer monthly to a shorter wage 
period, lest their earnings should be frittered away. 

30. Holidays with Fay. With the exception of employees 
in Government factories, railway workshops or under the loca* 
bodies and the enlightened employers like General Industries, 
Ltd., Lever Bros., and Tatas, workers in India are not entitled 
to any holiday with pay. The leave rules of Tata Iron* Steel 
Works, Jamshedpur, are very liberal. A monthly rated worker 
is entitled to one month’s leave with full pay for every year of 
completed service and has the right to accumulate this leave ; 
the daily rated worker who is paid monthly gest 5 days’ casual 
leave and 14 days’ privilege leave with pay and those paid weekly 
get 5 days’ casual leave. After seven years’ service, the monthly 
rated workers are entitled to six months’ furlough on half pay or 
three months’ with full pay. The subject of holidays with pay 
was discussed before the war in the Provincial Ministers’ 
Conference and as a result of the discussions held there the 
Government of India prepared a Draft Bill to amend the Indian 
Factories Act, 1934* The Bill provides for a minimum of 7 days’ 
holiday with pay for a year of service without the right to 
accumulate and half of the wages have to be paid in the 
beginning of holidays. Workers on holiday cannot take up any 
other job during the period. As for the customary holidays 
which the workers are now enjoying, the matter is left to the 
mutual consultations between the employers and their employees, 

31. Cost of Living and Standard of Living. Bombay was 
the first Province which began publishing cost of living index 
numbers in 1921. They have been published since then in the 
Bombay Labour Gazette and have been much improved since 
1937. They are now being published in almost every province 
but with varying base periods. Even in the same Province 
different base years have been adopted for different centres. The 
old index number in Bombay took 1914 as the base year and the 
new one 1934. The base year for the Punjab cost of living index 
numbers published for Lahore, Ludhiana, Sialkot and Rohtak is 
the average for the quinquennium ending 1935. 

The Bombay index number can be considered as a fair 
indication of the general trends. The annual averages of the 
index numbers there since 1934 are : 1935 — 100, 1936 — 101, 
1937—106, 1938—106, 1939—106, 1940—112, 1941“122, 1942 
January — 137 and June — 152. It is obvious that the cost of 
living as compared with 1934 has increased more than 50 per 



INDUSTRIAL LABOUR 


365 


cent. Although dearness allowances have been sanctioned, yet 
it is very doubtful if they are enough to cover the increased 
cost of living for the workers engaged in the various branches 
of industry. The present war has undoubtedly proved beneficial 
to industrial labour in India. There is hardly any unemployment. 
But it cannot be seriously maintained that the standard of living 
has gone up; so steep has been rise of prices. Further, the 
^masses are experiencing serious difficulties in procuring the 
necessaries of life. War, therefore, means a lot of hardship and 
suffering for the poor people. 

' Standard of Living . — In recent years almost in every province 
inquiries have been instituted in the working class family 
budgets, which throw a flood of light on the standard of living 
of the workers. The conclusions arrived at as the result of 
these inquiries generally conform to the EngeFs Law of Con- 
sumption. A big slice of the workers’ income is swallowed up by 
the most elementary necessaries of life or by interest and debt 
instalment payments. Hardly anything is left for education and 
medical aid. Expenditure on cultural and recreational needs 
is almost nil. The figures reveal a very low standard of life 
indeed. Even prisoners get a more wholesome diet and show 
a better weight and health than the factory workers in India I 
His diet is meagre and unbalanced, clothing insufficient and 
shabby and his house a mere hovel. Of relaxation and recreation 
he can never dream. For him a worker’s dwelling and 
environments in the West will simply be a paradise. A rich 
man’s dog is definitely better fed than the honest factory hand. 
Our social and industrial structure does not treat them as 
human beings. But for illiteracy and ignorance, their limit 
of toleration would have reached long ago. In the International 
Labour Conference in 1929 Mr, N. M. Joshi said: “Just 
and humane conditions are still in India a far off ideal and 
if evolution is too slow, the attractions of revolution are great.” 
We might add our own warning in the words of the poet ; 

O masters, lords and rulers in all lands, 

How will the future reckon with this Man ? 

How answer his brute question in that hour 
When whirlwinds of rebellion shake all shores ? 

How will it be with kingdoms and with kings — 

With those who shaped him to the thing he is — 

When the dumb terror shall rise to judge the world, 

After the silence of the centuries ? 


(Edwin Markham). 



366 


ECONOMICS OF INDIA AND PAKISTAN 


The following table^ shows the percentage distribution of 


expenditure 

under various 

heads for 

some working class 

families : — 





Group 

Bombay 

Nagpur 

Madras 

Lahore 

1932^33 

1927 


(family budget 





of a turner) 

Food 

46 60 

64.10 

52.63 

50% 

Fmic and Light 

7 il 

9.62 

6.67 

8% 

Clothing 

7.75 

10.70 

4 50 

House Rent 

12.81 

iO.92 

11.14 

6% 

Miscellaneous fincluding 




interest and debt 


25.06 


instalment) 

25.73 

13.66 



32. Labour under Provincial Autonomy ; The years under 
Provincial Autonomy witnessed a marked growth of conscious- 
ness among Indian labour. The mass of the workers were 
enfranchised by the new Constitution. Election speeches of 
the principal party leaders seemed to promise labour almost a 
millennium. The Congress party in its manifesto laid down as its 
policy “ to secure to the industrial workers a decent standard of 
living, hours of work and conditions of labour in conformity, as 
far as the economic conditions in the country permit, with 
international standards ; suitable machinery for the settlement 
of disputes between employers and workmen, protection against 
the economic consequences of old age, sickness and unemploy-* 
ment ; and the right of workers to form unions and to strive for 
the protection of their interests/’ The other parties, too, spoke 
almost in the same strain and the responsible Ministers amplified 
this policy in their speeches delivered on various occasions. For 
example, the Minister of Commerce and Labour in the Bengal 
Government in a statement in September, 1937, promised, among 
other things, labour exchanges, schemes of health and unemploy- 
ment insurance, adequate housing, etc. 

Thus the Indian labour came to entertain very high hopes of 
these popular ministries. They showed .a singular lack- of 
patience and as if to force the hands of Provincial Governments, 
the industrial labour launched a series of strikes in almost all 
important industrial provinces. There were more industrial 
disputes in the three years 1937-39 than in the seven preceding 
years. Committees of inquiry were appointed in Bombay, Bihar> 
U. P. and C. P. and a Court of Inquiry in Madras. Fortunately 
for labour, the industry had turned a bright corner and the 
employers were in a position to accept the recommendations of 
these bodies for higher wages and better conditions* of work; 

1. Indian Yea't'-Book 1942’^43, p, 5U. 



INDUSTRIAL LABOUR 


367 


But whereas the strikes enabled workers to wring out some 
concessions from employers, they also led the Governments 
seriously to think out the ways and means of putting a brake on 
such activities. An Industrial Disputes Act was passed in 
Bombay in 1938 which sought to bridle the strike-going 
propensity. A conference of Prime Ministers held in Poona in 
1939 decided to have uniform industrial disputes legislation in all 
provinces. 

There was a spate of legislative activity regarding labour in 
a.11 provinces. Maternity Benefits Acts were passed in U.P., 
Bengal and Sind. In C.P. legislation was contemplated regarding 
collection of statistics, registration of all factories and for relief 
to the unemployed and destitutes. Acts for regulating hours of 
work in shops and other commercial establishments were passed 
in almost all provinces. Had not the war intervened, much 
would have been done by way of ameliorating the conditions of 
industrial labour. These new Governments were decidedly more 
sympathetic to labour than those in the previous regimes. Being 
drawn from the people they could take more risks and adopt a 
Bolder policy. 

33. The World War II and Indian Labour. The World 
War II created conditions in many ways beneficial to Indian 
industrial labour. It afforded them an excellent opportunity to 
improve their status and conditions of employment. 

But it was not an unmixed blessing. The declaration of war 
created a pjanic in the commodity markets and prices of foodstuffs 
and other necessaries of life shot up. This meant a lowering of 
the real wages. In order to check exploitation of the bona fide 
consumers 'by the profiteers and! hoarders, price control measures 
were adopted all over India. But this was not enough. In order 
to ensure to the workers the maintenance of their pre-war 
standards of living, dearness allowances were felt to be necessary. 
The workers clamoured for them. Their demands ^ were 
dbneeded and in ail industrial centres dearness allowances, either 
in the form of a lump sum,“or a percentage of wages or on the 
s^liding scale system fluctuating with the cosri of living, were 
granted. - • 

. The dearness allowances did not seem to satisfy the workers, 
at any rate after some time. In Bombay ar\d » Ahmedabad there 
was ',a demand by the workers‘ for participation in war profits. 
Accordingly a war bonus of 12 per cent of their earnings was 
sanctioiiedin 1941. Next year, there were a number of disputes 
in other parts of India on this question. The employers 



368 


ECONOMICS OF INDIA AND PAKISTAN 


anticipating further trouble saw the wisdom of granting war 
bonuses without delay. 

For the efficient prosecution of war and maintenance of the 
essential services of national importance and to prevent the 
breakdown of the industrial machine, the Government had to be 
armed with certain powers. The National Service (Technical 
Personnel) Ordinance was issued in 1940 and was amended in 
January, 1942. According to this Ordinance any undertaking 
was to be declared as one of national importance. To supply 
personnel for such undertakings National Service Labour 
Tribunals were set up. The tribunals could ask any other factory 
to release any personnel for the ‘‘ declared ** factories. This 
personnel could not give up the employment without the 
permission of the Tribunal in that area nor could the employers 
discharge them without giving the Tribunal 15 days’ notice. The 
factories from which the labourers were released were bound to 
reinstate them on their old terms when they were no longer 
wanted by the essential service ” factories. The Tribunals 
could also transfer such personnel from one “ declared ” factory 
to another. Another ordinance called the Essential Services 
Maintenance Ordinance, 1941» was issued to prevent any person 
employed in a service declared essential ” from leaving the area 
in which he was serving. We have already mentioned Rule 
8TA of the Defence of India Rules which sought to ban 
strikes and lock'Outs and provided for the settlement 
industrial disputes. 

Among other events of importance in the world of Indian 
labour, we might mention the institution of two training 
schemes. The Government of India started a scheme of intensive 
technical training for literate persons between the years of 17 and 
40 to secure suitably trained personnel for the technical branches 
of Defence Services and ordnance and munition factories. 
Matriculate trainees were given a stipend of Rs. 27 p.m. and 
?5\^^""^aWculates Rs. 22. In February, 1944, there were in India 

^ possible training capacity of over 
Zo,UU0 skilled workers. The total number of trainees who passed 
out of these training centres up to 15th July, 1945 was 77,500, 
nearly. Another scheme was sponsored by Mr. Ernest Bevin, then 
British Minister of Labour, for the training of Indian workers in 
iinglish factories and workshops. The training was confined to 
engineering occupations. By the end of May, 1944 about 643 
trainees had been selected, out of these- 460 were returned after 
completing training. There is no doubt that as the result of 
these schemes we will have an army of educated, intelligent 



INDUSTRIAL LABOUR 


369 


and highly skilled workers ready to play their part in the 
country’s industrial development. They will be an asset of 
incalculable value. Those who returned from England are 
acquainted with the latest developments in the Trade Union 
Movement and methods and they may be expected to take up the 
role of industrial leaders, 

A War Injuries (Compensation Insurance) Scheme was en- 
forced in November 1943 under which the employees are obliged 
to pay compensation in respect of war injuries to workers covered 
by the Essential Services Ordinance 1941, 

A Labour Investigation Committee had been appointed to 
collect information for the use of the Planning Committee so as 
to enable them to draw up a programme of social security for 
Indian Labour. The Central Government had prepared a uniform 
scheme of social security for industrial workers in India covering 
health insurance, maternity benefits and workmen’s compensation. 
The Central Government will meet f of the cost of administra- 
tion for the first 5 years, i of the cost of medical care is to be met 
by Provincial Governments and the remainder will be met from 
employers and workers’ contributions. 

34, Resettlement of Demobilized Soldiers: In its 26th session 
held at Philadelphia in 1944 the International Labour Conference 
considered, inter alia^ the problems concerning ' the employment 
organization after the war. It laid down general rules for guidance 
of the governments. The Government of India decided to set up 
an integrated resettlement and re-employment organization to 
assist and advise both employers and the workers. A press note 
issued by the Labour Department, Government of India, on 8th 
February, ^1945, explained the necessary details. It was intended to 
set up a net work employment exchanges, the number to go up to 
71 by February, 1946, There will be a central exchange, nine 
regional exchanges and two special exchanges for naval and aircraft 
trades and 59 sub-regional exchanges, to each of which will be 
attached a number of Employment Information Bureaux, They 
will also have Employment Advisory Committees consisting of the 
representatives of employers and employees. A programme of 
technical training and vocational guidance will also be organized 
to equip the trainees for suitable employment in normal competi- 
tion with the other workers. It is expected that this will meet 
the man-power requirements of the post-war development 
schemes. 



CHAPTER XVI 


TRANSPORT-RAILWAYS 

I. Importance of Transport : “ If agriculture and industry 

are the body and bones of a national organism, communications 
are its nerves/’ ^ Transport and industry are obviously inter-* 
dependent. Even the agricultural resources of a country can 
neither be developed nor properly handled without adequate 
means of transport and communication. India is mainly an agri- 
cultural country ; 87 per cent of the people live in villages, while 
66 per cent of them win their daily food from agricultural occu- 
pations. The development of the means of communication has 
brought about a change from subsistence economy to the cultiva- 
tion of cash crops like cotton, jute, oilseeds and tobacco. With- 
bun means of transport these could be marketed neither inside 
nor outside the country, 

India is a sub-continent with huge distances. In the past the 
natural configuration of the country would not allow it to be 
unified. Men and materials could not be moved easily and quickly 
from one point to another. There were a few trunk roads built 
by the rulers of the day — the Afghans or the Moghals — but they 
were too few to meet the needs of the people of those times. 
Even today, more than half of the perishable produce of British 
India runs to waste on account of delay in reaching the market.”^ 
Huge areas are totally devoid of any lines of communication, and 
in Some districts 70 to 80 per cent of the villages are entirely cut 
off from communication with the outside world during the 
monsoon season. 

<>' 

The history of civilization is the history of transport and 
communications. The road-makers carried aloft the torch of 
light and progress. They led and civilization followed. Home- 
steads, hamlets, villages) towns and cities followed in their wake 
one after the other. The track was transformed into a road, un- 
metalled at first and the metalled. Trade and commerce dev- 
eloped till we find then world as it is. The economic progress of 
man corresponds with the evolution of the means of transport. 
Not only goods are carried by their means, but the cultural, social 
and moral advancement of a country directly depends upon 



TRANSPORT — RAILWAYS 371 


them. They diffuse knowledge, remove prejudice and destroy 
ignorance. 


As late as the middle of the nineteenth century, India had 
no roads worth the name. It was in the time of Lord Dalhousie 
that preliminary steps were taken in the pursuit of an active 
public works policy. We shall discuss under railways the nature of 
the policy followed — its selfishness and lack of planning. It is 
sufficient to remark here that the new means of communication 
resulted in the breaking down of the isolation of the villager who 
now started growing crops for the world market in place of the 
village market. 

' Means of transport in Indo-Pakistan are of four main kinds— 
(a) Railways, (b) Roads, (c) Waterways, (d) and Airways*' We 
shall deal which each of them one by one. 

2. Railways in India Compared With Other Important 
Countries. The total mileage of railways in Indo-Pakistan today is 
41,000 miles. Before the outbreak of the war a good deal of the 
mileage was worked by private companies like the Bengal-Nagpur, 
South Indian, etc., but now with a few very minor exceptions, all 
the company railways have been purchased by the Government 
and almost' cent, per cent, of them are State^owned. There are a 
few private lines like the Nizam Railway and Bikaner Railway 
owned by the Indian States. During the war the mileage has 
gone down by just a little more than 600 miles due to the closing 
down of some branch lines for material to be used for defence 


purposes. 

Mileage figures do not give a correct idea of the sufficiency of 
railways in a country. . They should be taken in relation to the 
area and population served. The following tables will give us a 
comparative idea of the position of India so far as railways are 
concerned. 


U,S.A. 

Union of South Aftica 
Argentina 

Australia and New Zealand 
Russia in Europe ... 


TABLE I 

Mileage of railways per loo square miles of area, 
6.6 Canada 


2.4 Europe excludirig Russia 
2.0 Belgium ' 

9 U.K, 

1.5 Getmany ... 

India and Pakistan 


TABLE 11 

Mileage of railways per too,ooo of population, 
... ... 455 U.S.A. 

... 164 U.K. 

India and Pakistan 


1.0 

11.5 

40.0 

20.0 
2010 

2.2 


224 

46 

11 


Canada 
South Africa 



372 


ECONOMICS OF INDIA AND PAKISTAN 


Table I above tells us that the railway mileage of India does 
not compare unfavourably with that of other countries where 
agriculture predominates, e.g.i Canada and Australia, but com- 
pared witlx industrial countries like Belgium and the U, K* India 
and Pakistan arc but poorly served. 

Table II is very revealing. India lags behind even agricultural 
countries like Canada, when the railway mileage is studied in 
relation to population. To compare India with a small highly 
industrialized country like Belgium would be meaningless. To 
have a correct perspective India should be compared with 
the U.S.A. The U,S.A. has almost twice the area of India. She 
has long distance, tall mountain ranges, deserts and huge rivers 
as India has. In spite of all these obstacles, the U.S.A. owns 
more than a quarter million of railway miles, while India can 
boast of a bare 41,000.^ Roads would be a great help and might 
fill the gap to some extent, but even in these India is deficient. 
She needs more railways, wisely planned in co-ordination with the 
other means of transport like roads and waterways. Unnecessary 
duplication resulting in ruinous competition is deprecated and 
should be avoided at all costs. 

3, Defects in the Growth of the Indian Railway Systems : 

Indian railways were not planned in advance and have grown 
haphazardly. The first railroad was from Bombay to Kalyan, a 
distance of 33 miles (1849). The next two were from Calcutta 
to Raniganj (123 miles) and Madras to Arkonam (33 miles), 
Bombay then was not a commercially important place, nor were 
Calcutta and Madras. They became pre-eminent because of the 
railways. Had railways been constructed on a plan, they would 
not have connected unknown places like Arkonam, Kalyan and 
Raniganj, but would have linked up places like Dacca and 
Benares and opened up the' rich agricultural areas of the country, 
like the U.P. Secondly, constructed from one point and opening 
out fan- wise, carrying all their materials with them for further 
extensions, they would have proved far less costly and proved 
less of a financial burden. 

The railways ruined old towns and relegated centres of old 
industries into oblivion while creating new ones on an unco- 
ordinated basis. They destroyed the cohesion of the old econo- 
mic system and did not help to evolve a sound one instead. The 
mainly created ' distributing centres ^ for foreign merchandise. 
It was only incidentally and much later on that they developed 
factory industries in seaport towns far awy from the interior. 

1. Report of the Royal Commission on Agriculture, 



TRANSPORT — RAILWAYS 


373 


The result is that these industries have to import their labour- 
force from distant areas v/hich leads to congested slums and 
labour troubles of various kinds. Even to-day the importance 
of these towns as distributing centres for foreign goods far out- 
weighs their importance as industrial ones. 

Dacca, Murshidabad and Madura were important industrial 
centres in old times. A sound railway system woufd have early 
linked them up and assisted them to grow and not transformed 
them into unknown non-entities, mainly used to distribute goods 
to people living near about. The Industrial Commission very 
correctly stated in 1918 : “ Most of the 500,000 villages have not 
yet been touched by metalled road or railway,” and things have 
not much improved since then. It is the system that his been 
at fault, not the railways as such. 

4. Benefits from Railways : Railways removed the horrors 
of famines in India. The great mortality in human and animal 
life disappeared. Until recent famines were no longer famines 
of food but famines of money. The recent Bengal famine was 
an exception. During 1943 the whole machinery of distribution 
in Bengal broke down. Due to various causes discussed elsewhere 
the supplies were insufficient and reserves nil. Railways and 
steamships have linked the cultivators of India with markets 
throughout the world.*^ The agricultural wealth of the country 
is exported abroad in return for foreign manufactured goods. 
The standard of living of the people has changed for the better 
only moderately, but the fault lies with the immense increase in 
population. The methods of cultivation over a large portion of 
the country are still as old as Methoselah, but for a glimmer of 
improvement in areas served by the railways. The railways not 
only disseminate knowledge but are also responsible for a greater 
use of improved seeds and manures and cheap transport of 
implements of a better type. 

Railways have tended “ to break up the existing social orga- 
nization ** of the country.*^ Caste prejudice has largely disappear- 
ed and the bonds of joint family system broken. But alongside 
these benefits, the Panchayat system has also gone into the limbo 
of the past and litigation increased multifold, but we must learn 
to take the good with the bad.' 

The mobility of labourer has increased. In the tea-planta- 
tion of Assam, the factories in Bombay and Calcutta, workers 

1. The Report of the Royal Commission on Agriculture, p. 367. 

2. Ibid. 

3. Dr. Vera Anstey — The Economic Development of India, p. 145. 



374 


ECONOMICS OF INDIA AND PAKISTAN 


from all over the country are found working shoulder to shoulder. 
If the various castes do not yet love each other, they have 
realized that they can live only by each other’s sufferance and the. 
credit largely goes to the railways for this wholesome change. 
The Brahmin with the caste-marks painted across his forehead 
travels to Benares in a third class railway compartment sitt- 
ing cheek by jowl with a low caste shudra whose shadow falling 
on him would have created a fine rumpus fifty years back] 

Quicker means of communication have greatly increased the 
amenities of life in urban areas. Fruit from Quetta, fish from 
Karachi, mangoes from Bombay, are selling all over the country, , 
Perishable articles like eggs and milk travel long distances over- 
night to reach their consumers the next day* 

It must also be borne in mind that the central administra- 
tion of a vast country like India is possible only because of 
railways. They have given the country internal security and 
external safety, 

5. History of the Development of Railways in India ; It 

easily falls into a number of prominent periods which will be 
dealt with one by one : — 

(/) The Old Guarantee System^ 18^9-1869. Lord Dalhousie’s 
famous minute recommending railways for India to promote 
British trade and commerce was accepted by the Court of Direc- 
tors. England was “ calling aloud for raw materials like cotton 
and markets to dispose of her manufactures like cloth, India 
also would gain similar “ social and commercial advantages.”^ By 
the end of 1859 eight companies had been formed under the 
Guarantee System. The Government agreed to supply land free 
to these companies and guaranteed a minimum interest of 5 per 
cent, on the capital outlay. The companies in return were to sell 
the railways to the State after 25 years or 50 years, if the Govern- 
ment so desired. They had to pay to the Government one-half 
of the surplus profits, if any, after paying themselves the guaranteed 
interest and to allow the Government general control over 
management, expenditure, etc. , 

This system met with universal condemnation. The pro- 
gress was slow due to the lack of engineers and skilled labourers. 
It is also difficult to imagine that English money could not seek 
investment in India without a guarantee and that, too, at a Tate 
so exhorbitant as 5 per cent. Sure of a solid return for their 

1. Lord Ddihousie— Railway Minute, 20th Aptil, 1853. 

2 . Ibid, 



TRANPSORT — RAILWAYS 


375 


money, the Managers and Directors did nothing to economise 
and the Government had to pay no less than two and a quarter 
million pounds^ of the tax-payer’s money during this period. 

The system proved too costly and burdensome. Nor could 
the Government keep effective control. They tried to attract 
capital by promising subsides for every mile of line and bridge 
built but failed and in 1869 made up their mind to go in for 
constructing railways themselves. Under this system 4,255 miles 
of railway were built. 

{//) State Construction of Railways, 1869''1879. — For ten years 
the Government did not make any fresh contracts with any com- 
pany and found four crores of rupees a year for railway construc- 
tion. By the end of 1879 the total mileage reached 8,000., Out 
of this 6,000 miles had been built by the companies at a cost of 
£98 million and 2,000 miles by the Government at less than 
one-fourth the cost of the companies. 

The Strachey (Famine) Commission reported in the year 
1880 that India must have an additional 5,000 miles of railways 
to ensure safety against famines. The Government was not able 
to find money for this increase and had to go back to the old 
system. 

(Hi) The New Guarantee System, 1879-1900. — Heavy expendi- 
ture in the relief of .two consecutive famines in Bihar and the 
Deccan and the fall in the value of the rupee compelled the Gov- 
ernment to give up construction of railways and once again to 
have recourse to contracts with companies. They were, however, 
wiser by experience and made better bargains now. They guaran- 
teed 3| per cent, interest on the portion of the capital found by 
companies, reserving for themselves three-fourths of the surplus 
profits, if any, and the power of terminating the contract at the 
end of 25 years or after further intervals of 10 years on payment 
of the capital at charge to them. The total mileage of railways 
laid down in this period was 4,000. 

(iv) Pre-war Period, 1900-1914. — Although the main railway 
lines were complete by 1900, yet branch lines were urgently needed 
to supplement them. In 1907, the Mackay Committee stressed 
the need for a steady annual outlay of capital on railways, and the 
amount they suggested was 18 crores a year.. The Government 
could not keep to the letter of the recommendation bur did actu- 
ally invest 92 crores of rupees in six years from 1908-09 to 1913-14. 
During this period more than 10,000 miles of branch and feeder 

1. R. C, Dutt— India in the Victorian Age, 



376 


ECONOMICS OF INDIA AND 'PAKISTAN 


lines were laid. The total railway mileage in India in 1914 was 
more than 34,000 and total investment about 500 crores of rupees. 

(v) The War-Period, 1914-'1920. — Neither rolling stock not 
engines could be imported during the war years. New programme 
of construction had to be postponed indefinitely to the future. 
Even the lines in working could not be maintained. The strain 
of carrying men and materials for the army was too heavy to 
cope with. Some of the staff, rails and rolling stock had to be 
despatched to East Africa and Mesopotamia for conduct of war. 
The railway system utterly broke down. Many bridges grew too 
rotten to bear trains safely. Engines, not worth even yard duty, 
were still upon the line. Goods wagons were used to carry 
passengers on branch lines. Goods lay rotting in the godowns for 
weeks before they could be loaded into wagons. The Acworth 
Committee wrote in 1921, “There arc many miles of rails, 
hundreds of engines, and thousands of wagons whose rightful 
date for renewal is long overpast.’’ Naturally there was a clamor- 
ous demand by the public for the abolition of British domiciled 
company system in favour of the State management of railways. 

(vO Railways since 1921. — In November 1920, an expert com- 
mittee was appointed under the presidentship of Sir William 
Acworth, a British Railway expert. The committee submitted its 
report in 1921. The contract with one of the most important 
companies (E.I.RJ was over in 1919 and had been renewed for 
five years. Whether the contract was to be further renewed or 
the company bought out, was one of the important questions to 
be considered by the committee. A large number of witnesses 
were examined and the pros and cons of State vs. Company 
management carefully gone into. 

6. Argument for and against State Management in India : 

All Government departments are a slave to routine and red- 
tapism. They have neither despatch nor initiative. They are 
more swayed by political considerations than those of efficiency in 
their promotions. Railways are a commercial proposition and need 
business methods ; dash and enterprise at one time, conservatism 
and caution at another. Such qualities are rare in bureaucrats, 
trained in juggling with files and in postponing decisions. Rail- 
way budget being a votable charge, railway policy would depend 
more or less on party politics and could not be expected to be 
uniform and^ continuous. Other countries like ' the U.S.A. 
and the U.K. have no doubt efficient, privately-owned and 
operated companies, but they belong to the country and are 
strictly regulated and controlled. Railways in U.K. are being ’ 
nationalized by Attlee’s Labour Government. 



TRANSPORT— RAILWAYS 


377 


The Acworth Committee were not unanimous in their find- 
ings for State management in India. The President and four 
members recommended State management, and the other five 
members were in favour of management by companies domiciled 
in India. The President’s side won with his casting vote. 

In spite of the apparently strong case enunciated against 
State management, we find that, conditions being different in 
India from other countries, the arguments do not hold water* 
Most of the capital involved in railways belongs to the State. To 
hand over such vast property (represented by 808 crores of rupees 
in 1945) to companies with headquarters in England is unthink^ 
able. India had enough of them in the early days of railway 
development. The system of ‘‘ dyarchy ” or divided respons- 
ibility can never make for efficiency. The companies have no 
stake in the financial success of railways. They have no incentive 
to economise. Further, the Government will not give them a 
freehand to undertake new enterprises or instal changes without 
previous sanction. With the State as dominating partner, with- 
out powers of initiative, even Indian domiciled companies were 
bound to be a failure. There was no attraction for the few, 
really capable Indian entrepreneurs to undertake to run railways 
when they were sure to be browbeaten and hampered at every 
step by the executive. 

Further, Indian sentiment is in favour of State management 
of railways. Money invested belongs to India — Indian opinion in 
the matter should be final. Indian belief, based on experience, 
is that in railways there is no room for Indians at the top, unless 
the State manages them. This is not an argument that can be 
lightly dismissed. In addition, all profits would go into the 
central exchequer and help to reduce the burden on the tax- 
payer. Company management in India was prone to discriminate 
in favour of foreign imports in their rates. This was detrimental 
to Indian industrial interests. Such discrimination, it is held, is 
not possible under State management, as the State is more amen- 
able to public criticism. Grievances of business men and poor 
class passengers can be more easily ventilated and redressed with 
State at the helm of affairs. 

Co-ordination of the means of transport is more feasible with 
railways owned and managed by the State, It will look on roads, 
railways and waterways with an open mind and try to develop 
every one of them as it deserves. Company railways in the past 
cruelly undercut traffic on water, both coastal and inland. The 
Government of India, although not giving up in principle their 
preference for company management, took over the East Indian 



378 


ECONOMICS OB INDIA AND PAKISTAN 


Railway and the Great Indian Peninsular Railway in 1925, the 
Burma Railway in 1929 and the South. Punjab Railway in 1930* 

Today India and Pakistan manage the following railways : (1) 
B.B. & aU (2; G.LE, (3) N.W.R., (4) EJ.R., (5) Bengal and Norths 
Western (now called Oiidh and Tirhoot) (6) Bengal and Assam, 
(7) RoLilkhand and Kumaon, now a part of the Oudh and Tir- 
hoot Railway, (8) Madras and South Marhatta and (9) South 
Indian Railways purchased in 1944-45 (10) and the BengahNagpur 
Railway purchased in 1943^44* 

The Indian railways are now almost 100 per cent. State 
owned and they are 99| per cent, operated by. Indians and 
Pakistanis. They are an asset of which both can be proud. 

Railways belonging to the State but managed by companies 
are very small and minor ones like the Dhone Kurnool,- Bezwada 
Railway, etc. There are some railway lines like the Bikaner 
State Railway and the Nizam State Railway owned by Indian 
States. These also are not very important. 

7. Railways during the War, 1939..4S ; The railways during 
the recent war were much better equipped to meet the emergency 
than, during the last war. For the first two years of the war, “ it 
seemed they could discharge most of the demands raiade on them.” 
But in 1941-42 military traffic grew enormously while alternative 
means of transport contracted to an embarrassing extent At 
the same time rolling stock and rails had to be requisitioned to 
meet the requirements of Deferice while a good bit of the skilled 
personnel had to be sacrificed for military and ancilkry services. 
The rising tempo of war resulted in serious hardship and incon- 
venience for civilian traffic. 

■ Due to the entry of Japan in war, coastal traffic was greatly 
reduced and the whole pressure fell on the railways, specially the 
work of transporting coal. “The movement of coal accounted 
for about 40 per cent, of the total freight tons in the past year” 
(1941-42):^ Hence the number of wagons left for “ public” supply 
Was v6ry inadequate. Replacements of worn-out stock were diffi- 
cult. “But owing to the enterprise of .Messrs., Tatas, a plant, 
which was started up in November 1941 will, after a trial period, 
he able to^meet all Indian demands of wheels, tyres and' axles 
which 'were ordinarily imported from abroad. This is a matter 
fqr congratulations, indeed. ' ^ - - 

r 

1. Sir Andrew Clow — Railway Budget speech, February 1943, p. X. 

^ 2. Ibid. . . . , 

3. Ibid, ptT.' 



TRANSPORT — RAILWAYS 


379 


Some of the railway workshops were given over to the pro-- 
duction df munitions in which more than 80,000 skilled techni- 
cians were employed. 

On July 9, 1942, the War Transport Board was created and 
placed in charge of Sir Edward Benthall. The Railway Depart- 
ment was also handed over to him. While presenting the budget 
for 1943-44, he remarked, “ Since last year, not only has the tide 
of battle lapped our shores and thrown upon the railways much 
traffic which would normally have been sea-borne, but the 
railways have had to face an organised, malicious and determined 
internal attack designed primarily to put them out of action, and 
on top of all this, a series of almost unprecedented floods and 
cyclones.” The Transport Board had to solve three main 
problems : — 

(a) The problem of carrying military and essential services by 

rail. 

(b) The problem of organizing alternative means of transport, 

(c) The problem of creating and organizing administrative 
machinery for the above. 

Accordingly, a Central Transport Organization with Provin- 
cial Regional Transport Boards was created in February 1942. Its 
duty was to relieve traffic congestion on railways by co-ordinating 
all forms of alternative traffic. The job has not been any easy 
one. It has been a source of headache both to those who are in- 
charge of it and to those who use transport. Traffic has been 
diverted where possible from railways to- coastal craft, both 
steamers and country boats. Wherever there are 'suitable roads/ 
traffic is diverted to them. 

During the, past three years (1941-44) railway transport has 
been rationalized. All non-essential traffic has been discontinued 
and a system of priorities introduced. Special arrangements for 
Mela traffic (like the Kumbh Mela) have been cancelled and 
cheap fares and concessions of all kinds withdrawn. Passenger 
trains have been much curtailed resulting in extreme congestion 
in this trains. ' Passengers have been seen hanging on to foot- 
boards, riding on the tops of trains and even on the buffers 
between the bogeys. In spite of the railway propaganda of 
Travel only when you must,” according to Sir Edward Benthall, 
railways have had to carry 20 million more passengers a month 
or 6,50,000 a day.t The increase has not been uniform over the 

1. Sir E. Benthall, “Indian. Review” for January, 1945: “ Transpdrt in 
Wartime.” 



380 ECONOMICS OF INDIA AND PAKISTAN 

whole of India ; in the Punjab it had been 100% while in Howrah 
(Calcutta) only 40% Military movement had increased no less 
than 27 times. 

Railways have tried their best to see that each wagon travels 
fully loaded and is never idle. The rate for parcels has been 
increased and an extra charge of 4 annas per rupee imposed on all 
consignments of less than a wagon load. 

In 1942 India was divided into three zones for imported 
goods which were landed in the port nearest to their place of 
destination. 

All this was possible, “ by steady improvements in operating 
services and constant attention to maintenance.’’^ The daily 
task of each locomotive was increased, and the wagon’s average 
load further enhanced. It will have to be admitted that in 
spite of the difficult circumstances, “ the railways succeeded in 
maintaining the life of the country, whilst meeting the demands 
of the military and of every essential industry including the 
transport of foodstuffs to deficit areas. 

8. Railway Finances : (/) From 1858 to 1898 railways in 

India were a losing concern. The total loss incurred during these 
years was about 58 crores of rupees. These consistent annual 
deficits were mainly the result of uneconomic construction, ineffi** 
ciency of guarantee companies, lack of sufficient traffic and 
presence of strategic lines like the N. W, R. (in Pakistan). 

After 1898 the deficit changed into a surplus except for the 
years 1908 and 1921. These surpluses continued till 1930 and 
were due to the new irrigation works in the Punjab and Sind, 
increase in traffic brought about by the economic development of 
the country, better financial bargain's with the companies and a 
great rise in the foreign trade of the country. 

(//) The Separation of Railway Finances^ 1924-30. — In addition 
to important changes i-n administration brought about by the 
recommendations of the Acworth Committee in 1922 the railway 
finances were separated from the general finances from 1924-25* 
Cogent reasons were advanced for this revolutionary' departure 
from the old practice. 

(ci) So long as the railways remained a part of, the general 
finances, their fortunes varied with those of the Central Govern- 
ment. The financial position of the Government reflected itself 

1* Sir Andre.w Clow — Budget speech, 1942-43. 

2. Sir Edward Benthali — Budget speech, 1943-44* 



TRANSPOBT— RAILWAYS 


381 


in that of the railways. In these circumstances, there could not 
be a continuity in railway policy and business methods could not 
be pursued in their working. In good years there was waste, and 
in bad ones, starvation of essential services. Railways were a 
commercial proposition and could not prosper when no reserves 
were maintained for them, and in good years the whole of their 
surplus was utilized for general purposes. 

(b) Even as long ago as 1924, the railway budget was a huge 
affair, the gross receipts being above 100 crores of rupees. A good 
year for the railways made the Central Budget prosperous and 
vice versa. The prosperity of the railways depended on the mon- 
soon. Ample and timely rainfall reflected itself in abundant 
traffic, both passenger and goods. Thus the Central Budget was 
nothing short of “a gamble in monsoon’ h 

The separation of the railway finances from the general 
finances would enable the railways to be run on a commercial basis 
and 'would relieve the general budget of the most fluctuating and 
incalculable factor which made it a gamble. 

A Convention was adopted by the Central Assembly in Sept., 
1924, that the railways were to make a' fixed annual contribution 
of one per cent on the total capital at charge on commercial lines 
plus one-fifth of the surplus profits in that year. The interest on 
the capital at charge of the strategic lines (like the Khyber Rail- 
way) and any loss in wbrking them was to be debited to the 
general revenues. In addition to the above payments, the 
railway revenues had to pay to the Central Government one- 
.third of the excess over three crores of any surplus remaining to 
them. 

Contributions to the Depreciation Fund were to be deduct- 
ed as a part of the expense. After making all payments what 
was left over was to be credited to the Railway Reserve Fund. 
On this, tooi the Central Government had the first lien if their 
contribution of one per cent interest was not paid in any year. 
The Railway Budget for 1944-45 Vould illustrate the point 



382 


ECONOMICS OF INDIA AND PAKISTAN 


Heads of Revenue 
A~STATE RAILWAYS 
I Commercial Lines 


Gross Receipts *»• 

189,37 

Total Gross Receipts 

Deduct — 

189,37 

(a) Working Expenses ... 

(b) Surplus profits 
paid to Indian 

States and Railway 

1C9,66 

Companies 

(c) Payment to worked 

73 

lines 

1,87 

Net Receipts 

Strategic Lin«>s 

77,11 

Gross Receipts 

Deduct— 

2,63 


In lakhs of rupees 

Heads of Expenditure 
A-STATE RAILWAYS 
I Commercial Lines 
Interest — 

(^a) On Government 
capital charge 

(b) On capital contributed 
by companies 


27,27 

33 


II 


Working Expenses ‘ ... 2,77 

Net Receipts ... — 14 

Total Net Receipts 
Commercial &. Strategic 
^ Lines ... 76,97 

SUBSIDISED COMPANIES 
Government share of profits 10 
O-RAILWAY MISCELLANE- 
OUS RECEIPTS 

(a) Interest on all Deprecia- 
tion Fund balances ... 3,27 

(b) Interest on Reserve Fund - 


Total interest ... 27,60 

(Commercial lines) 

1 1 Strategic Lines 

Interest on capital at charge 17,14 


Total Interest ... 28,74 

B~SUBSIDISED COMPANIES 
Land and subsidy ... 4 

C— MISCELLANEOUS RAIL- 
WAY EXPENDITURE 
Commercial and strategic 
lines ... 73 


balances ... 1,20 

(c) Dividends, etc., on 

branch line investments 18 

Total Receipts ... 81,72 

Transfers from Railway " D-PAYMENTS TO GENERAL 

Reserve Fund ... , Nil , REVENUES 

Grand Total ... 81, 7Z, Contribution 31,37 

Payment of area con- 
tribution Nil 

E-TRANSFER TO RAILWAY 
• ' RESERVE FUND 20,84 

F-REFUNDS OF SUMS WITH- 
DRAWN FROM THE RLY. 
DEPRECIATION FUND Nil 

Grand Total 81,72 

The railways contributed to the general revenues in 7 years 
from 1924-1925 to 1930-31 a total of Rs. 41,65 lakhs of rupees, 
but in the last year, 1930-31, the interest charges were higher 
tmn the net revenue by above Rs. 5 crores. Hence the con- 
tribution to the general revenues was paid out of the railway 
reserves. 



TRANSPORT— RAILWAYS ' 


383 


From 1930-31 to 1936-37, the interest charges always exceeded 
the net revenue* In 1937-38 net revenue improved and was 
higher than the interest charges by Rs. 2,76 lakhs and this was the 
contribution made to the general revenues.' ' 

After the break-out of the last war, the railway revenue 
improved all of a sudden due to increased traffic, destruction of 
road arid coastal competition and heavy transport of army men 
and material. The railways wiped away all the arrears due from 
them to the general revenues as well as paid back the loans from 
the Depreciation Fund. It will be seen that the railways 
contributed no less than 20 crores of rupees a year to the Central 
Government in 1941-42 and 1942-43 and made a further 
contribution of the remarkable amount of about Rs. 38 crores in 
1943-44. Thus, since, the beginning of the war to the end of the 
fiscal year 19^5-46, the general revenues will have gained from the 
railways the magnificent sum of Rs, 158 crores. 

The Moratorium —According to the Convention adopted in 
the Assembly in September, 1924, the first charge on the railway 
surplus was the Depreciation Fund. Daring the years 1929-30 to 
1936-37, the railways not only spent away the whole of the 
Reserve Fund but borrowed 31 crores of rupees from * the 
Depreciation Fund. Thus the first surpluses after 1936-37' should 
have gone to the Depreciation Fund and anything, if left over, 
should have been contributed to the general reserves. In 1937, 
the Railway Member proposed a moratorium for three years for 
the repayment of this liability. The moratorium was later 
extended to 1942 and then for another year. . By 1943, however, 
the arrears in contribution to the Central Government as well as 
loans, from' the .Depreciation Fun^d (paid in the years 1940-41, 
1941-42, and 1942-43) were all cleared. 

■ “ Budgets for 1942-43. and 1943-44. — ^Proposals for a new 
Convention. . , - . ; 

In his budget speech in 1942, Sir Andrew Clow anticipated a 
big' surplus . in 1942-43. He informed the House that the 
provisions of the old. Convention could not .be allowed to take 
their ordinary course, for that would mean denying such relief to 
the-tax^payer as he could legitimately ask, for. The moratorium for 
one year, would allow the surplus Xo be idivided between the 
railways and the general .revenues on the same principle as 
before, , , 

, In February 1943, Sir Edward Benthall proved that the 
Separation Convention of 1924 had not .achieved its objective of 
the prosperity of railways. He remarked that by. 1939-40 no less 
than 18 crores of rupees had been withdrawn from the Reserve, 
the Contribution to the general revenues had fallen short of 36 



384 


ECONOMICS OF INDIA AND PAKISTAN 


crorcs of rupees, and loans totalling over 30 crores of rupees had 
been borrowed from the Depreciation Fund to meet the interest 
charges. Railway finances were in a most perilous state. The 
Convention had also failed in war, as a moratorium had to be 
declared time after time in order to give an extra share of the 
surpluses to the general revenues. 

The War Transport Member, therefore, proposed that the 
terms of the Convention relating to contribution and division of 
surplus between the Railways and the Central Budget should be set 
aside ; but the new Convention should be adopted later, after due 
consideration and discussion, while during the war the policy 
followed should be flexible. The object of the proposal was that 
the general revenues should get large contributions and Railway 
Reserve Fund should be substantially provided to meet post-war 
reconstruction. He stressed the point that the railways should 
not be in the thoroughly exhausted condition they were in, after 
the Great War of 1914 ; otherwise, the old lesson would have 
been learnt in vain. 

Budget for 1944-45. — Sir Edward Benthall proposed two new 
impositions (1) 25% increase in railway fares and (2) 20% surcharge 
on carriage of coal for the year and argued that Rs. 10 crores 
accruing from increased passenger fares would be earmarked 
for providing amenities for lower class passengers. This increase 
would help in bringing about a little deflation as well as reduce 
pressure on railways. The Railway Member argued that there 
was urgent need for the creation of greater reserves 

(a) for abnormal needs for repairs after war and for writing 
down stocks purchased at inflated prices. 

(b) and for continuing high wages and coal bills after the 
war when net railway receipts would probably go down. 

Mr. L. P. Misra was entrusted with the planning for post-war 
developments and reconstruction. It was good that the then 
Railway Board concentrated on the . construction of loco- 
motives and boilers in India. There were schemes for- improved 
handling of post-war goods, parcels and flassenger traffic and 
participation of railways in road services. In the meantime a 
good many heavy engines, broad-gauge and metre-gauge loco- 
motives were received in 1943-44 and orders for more locomotives 
and wagons from abroad placed in 1944-45. 

The proposal for the increase of railway fares was dropped 
by the Transport Member as there was a storm of indignation in 
the country. It was argued that the Railways could . not 
reasonably increase fares and raise the rost of living in the face 
of the vast surpluses they were earning. 

* Budget for 1945-46. — The results of the working of Railways 
for three years are given in next page in the form of a table— 



TABLE IV 

Financial Budgets of Railways Since 1930^31 


tSI 

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386 


ECONOMICS OF INDIA AND PAKISTAN 

In lakh? of Rs* 

Particulars Final Accounts Revised Estimates Budget Estimates 

1943-44 1944-45 . 1945-46 

Gross Traffic Receipts 185,43 214,30 220,00 

Total Working Expenses - 103, R4 1-47,49 159,87 

Net^Traffic Receipts 66,81 - 

Net Miscellaneous Receipts . 2,7'8 ^ 3,01 3,77 

Total NetuRevenue 79,37 _ 69,82 ' 63,90 

Less Interest Charges ^ 28,53 27,39 27,39 

Surplus - 50,84 42,01 36,51 

The year 1944-45 was a successful year for the railways. 
Warwork had been done efficiently. No less tha^n 1400 miles of 
sidings had been constructed. At places lines had been doubled 
and quadrupled for conveniences- of military transport. 

The -yearns working too disclosed a great increase in receipts* 
The increase in coaching (mainly, passengers) traffic was. consider^ 
ably higher than in goods. Some ten million more passengers 
were carried every month than in 1943-44;* Upper and inter-xlass 
traffic showed a larger increase, due to more money being ayail- 
able. The publicity campaign to restrict travel had. proved 
fruitless and jpolke had to be called in tO' prevent travelling on 
foot-boards. ’ 

There was an equally great increase in expenses. One cause 
.of increased expenses was the relief in caih and kind provided to 
the railway staff. As many as 689 Grain Shops were functioning 
in the year 1944, selling 1,300,000 maunds.of grain per month. In 
addition there were officers’ shops supplying miscellaneous articles 
!of daily use at controlled rates* The cost of this elaborate system 
of relief pame to Rs. 20 crores. ‘ 

' ‘Another cause of the steep rise in expenses was the result of 
a special war-time arrangement under whiich a major portion' of 
expenditure of a capital nature which had hitherto been debited 
:to P Capital ” and “ Depreciation Fund ” accounts was to be 
debited from 1944-45 onwards to current revenues. Thus Rs. 66 
crores would be debited to working expenses as below ; — 

Rs, 14 crores — 1944-4$*" 

Rs. 30 crores — 1945-46. 

^ Rs. 12 crores — 1946-47* 

. To enable the railways to finance this special liability with 
due regard to the needs of both the general revenues and rail- 
ways, it was decided to stabilise the railway’s contribution to the 

1944-45 and 1945-46 (see 
^^ble IV) instead-of dividing. the surplus in the proportion of 3-1 



TRANSPORT— RAILWAYS 387 

iti terms of the resolutioas passed by the Central Assembly Jn 
March, 1943.^ " ' / ' 

These unusual steps were taken to give effective protection to 
the Depreciation Reserve Fund and Capital Account and thus 
avoid the mistakes in railway finances made in the first war and 
commented upon by the Ackworth Committee^ Sir Edward 
Benthall finished his Budget speech in the Assembly, on February, 
1945, with the words, “ I commend this somewhat unorthodox 
budget^ to the House in the firm belief that, if it is adopted, the 
railways will enter the post-war period, with their duty to the 
country faithfully performed, in a fit state technically to cope 
with the expansion of trade and industry which we all look for, 
and, if the present policy is continued, in a fit state financially to 
give a fair chance to the governments of the future/’ 

(Hi) The Pope Committee 1932. — T-he Great Depression of 1930 
found the railways unprepared. They could not o.nly not pay the 
Contribution to the general revenues ; they could not even pay 
the interest due on the Capital at charge from 1931 onwards* In 
1932, the services of a British Railway expert, Mr. Pope, were 
obtained to suggest economies. He recommended job analysis ” 
to” be carried out on the main railways/tp effect economies. He 
further suggested publicity of railway activity everywhere in 
India and abroadj to^ attract, tourists to places of historical, reli- 
gious, architectural and natural beauty-interest served by the 
railways and to ‘provide all kinds of amenities for travellers. To 
increase goods traffic a scientific- study of exports and imports and 
rates and fares was proposed. \ ‘ • . 

At Mr. Pope’s advice many other steps were taken toifnprove 
the finances of the railways during the years of depression* , For 
instance, in areas of great motor competition,' cheap single and 
week-end return tickets were introduced ; street collection arid 
delivery of, parcels was arranged in big cities and freight rates for 
goods were reduced. Special “ pilgrim trains ” to tour tq. places of 
religious worship for different communities in India Were" run 
while special concessions were offered to sports team^ and parties 
of tourists. The rail way 3' a feo" pooled- their-resources in locomo- 
tives and mechanical repairs. In fact every effort was made to 
improve matters, ' : 

- (iv) The Wedgewood Committee, 1937.— Sit Otto Nzemeyer, 
the financial ..expert, recommended the distribution of half the 
income-tax realized in a year among Provinces in India on the- 

‘ l. Finance and Curreacy Report for 1944'45. 

2. ” Italics ours. 



388 


ECONOMICS OF INDIA AND PAKISTAN 


condition that the railways earned enough profits to pay their 
contribution to the general revenues. Hence the need for a 
thorough overhaul of the working of Indian railways on the eve 
of the introduction of the new Constitution was urgent. Accord- 
ingly a Committee was appointed in 1936 with Sir Ralph L. 
Wedgwood, Chief General Manager, London and North-Eastern 
Railway, as chairman with two other members. The Committee 
submitted its report in 1937. Its main recommendations were 
that— 

(a) The railways should stop paying their contribution to 
the general revenues and be made fully solvent. 

(b) The Depreciation and General Reserve Funds of the 
railways should be increased until they were adequate 
enough for all purposes. 

(c) Proper steps should be taken to meet the road competi- 

tion, e.g., speeding up in trains, introduction of bus 
services, etc. 

(d) More service should be got out of the rolling stock for 
which more European mechanical engineering staff 
should be engaged. 

(e) Closer contact should be maintained with the Press and 

traders and business men in the country. For this pur- 
pose an information bureau should be organized. 

The various suggestions of Mr. Pope to effect economy were 
stressed and reiterated. 

There was a storm of indignation in India at the Com- 
mittee’s recommendation of further Europeanizing the staff and 
the stoppage of contributions to the general revenues. These 
were rejected in toto by the Assembly and Sir Sultan Ahmadj the 
Railway Member, assured the House that there would-be no 
tampering with the contributions to the general reventies and 
no discontinuation of the policy of steady Indianization* of rail- 
way services. 

9, Railway Rates : In the early days of railway construc- 
tion in India the -Government did not interfere with the Com- 
panies in the matter of rates, apart from the fixation of maximum 
and minimum charges. Each company had its own terms of 
contract with the Secretary of State. Hence there was a great, 
diversity of rates in the country. ■ In 1887 the Government laid 
down some principles for the fixation of rates on railways— 



TRANSPORT— RAILWAYS 


389 


(a) The state was to fix the maxima and minima charges, 
but was to make no further interference as that would 
hamper trade. 

(h) The state was to be on the look-out that no undue pre- 
ference was shown by the railways to particular persons 
or bodies. 

Attempts were made to bring about a uniformity in the 
classification of goods for freight charges but they did not succeed 
Discrimination in favour of foreign imports and European busi- 
nessmen was persistently complained of by Indian interests. Such 
complaints were voiced frequently in the Legislative Council as 
well as before different Committees like the Industrial and Fiscal 
Commissions and the Acworth Committee. 


Till recently Indian commodities were divided into 16 classes 
and maximum and minimum charges fixed for their transport. 
The railways could not Infringe these charges without previous 
sanction of the Railway Board. 


TABLE V 


Class. 

Maxima. 

Minima. 

1 

... 0,38 


2 

0.42 


2-A 

0,46 

0.10 

2-B 

0,50 


2-C 

0.54- 



Class. Maxima, Minima, 

3 ... 0.58 

4 ... 0.6Z 

4' A ... 0.67 

4-B ... 0.72 

5 ... a?? 

6 ... 0.83 

6-A ... 0,89 

7 ... 0.96 

8 ... 1.04 

9 ... 1.25 

10 1.87 


The fix^ition of minimum charges is a unique feature of 
Indian railways. No other country haa it. This is because the 
State, haying guaranteed a certain amount of interest to the 
c'omj^nies, did not want their interests to suffer from reckless 
Competition^ 


The charged on Indian railways are not at all high and com- 
Ipare favourably with the charges on railways in other countries. 



390 


ECON(3MtCS-OF INDIA’ AND 'PAKISTAN 



In ceritimes* 

TABLED' VI 


Country. 

Passenger 

Average Receipt 

Kilometer. 

per ton Kiloineter. 

Italy 

4.14 

, 456 

Germany ... 

2.95 

4.32 

Great Britain 

239 

4.83 

France , ... ' 

... 2.41 

^ : 4.49 

'South Africa . ■ .... 

... 

3.26 

C«anada ,, , 

3.98 

3.84 

US. A ‘ ... : 

3.69 ' 

- — 1.84 

Arg ntine Republic 

2.02 

2.57 

India and Pakistan ... 

1.25 

2.50 

Japan 

1.00 

1.39 


The rates oa;^ndiaa railways are lower than those in all.otlier 
CO, uptries except Japan in the above table. Discrimination against 
Indian manufacturing interests was one of those reasons which 
led to a demand for State management in preference to Company 
management. 

Another complaint against, the railways has been that the 
system of fixing rates in India is discontinuous If goods travel 
on two lines; the rate is not- calculated on the through-distance, 
but on the distance travelled over each line separately. 

The Acwokh Committee recommended a Railway Rates 
x^rbunal, similar- to- the^^one created>in the United Kingdom by 
the Railway Act of 1921 on the ground that there was a great 
k India due to the alleged discriminatory rates, but 

^e Government did not see their way to implement the proposal, 
^hey argued that railways in the U,K. were a private concern 
while the Statei was , directly interested in them in India. The 
Gover^ent felt afraid that the decisions of an independent 
Rates Tribunal might interfere with their financial interests. 
1 hey created only a Railway Advisory Committee in 1926 with 
very limited powers. This body has neither been very useful nor 
popular. The Government of India Apt of 1935 has perpetuated 
mis Committee, and it* cknnot be said when an independent 
1 nbunal will replace it. , . . 


1* Centime is one-hundredtb dt alranc* 1 francs Could puichase" £1* 
2. Repoft of the Wedgewood Committee, p. lU 



CHAPTER XVII 


-TRANSPORT— ROADS 


1, Roads in India compared with those in Either Countries : 

Roads in India were not built on a compteheiisive plan. -They 
were built for military reasons as were tbe’ old -Roman roads/ 
They -were mainly trunk roads and the earliest of these was built 
by Sher ' Shah. The main roads today connect Peshawar, 
Calcutta, Delhi, Bombay and Madras. They -were constructed 
not for economic reasons, but for strategic purposes. They -were 
“ marching roads to march soldiers to the poinf of danger. 
This is the reason why they were put in “ the charge of military 
boards, one for each presidency ” till 1855 when they were given 
over to the Public Works Department to manage.^ - ■ ■ ■ 


Today Indo-Pakistan possesses 65,000 miles of metalled roads, 
with-another 20, ,000, bn which motor vehicles can run and 2,30,000 
of unmetalled (kutcha) roads. The total mileage of 300,000 is too 
little for a country of India’s size and population. ^ The following 
table will.showrhow indequately India is equipped' with roads as 
compared to otWr countries : ' , ' ^ 

. . . . .TABLE I ; 


Country . 


' .f'', _ 

Germany 
U,S.A. , 

India and Pakistan 


Road miles per * '* 
-sqviare mile of area 

3*00 

2*00 

.1:89 ■ 

‘ " ‘P19 
100 
0*48 


Road miles per 
100,000 of population 

684 ' 

277 

1,392 ■ 

565 

2,853 

142 


Roads in India, metalled and unmetalled, are too few, both 
in regard to area and pbpulatioti. The worst served areas in this 
respect are Sind, Rajputan^, East Bengal, Assam, Orissa, etc., for 
obvioh^' reasons. Either t^ie areas are too arid and thinly popu- 
lated, or too rainy and -jungly with unbridgable gorges and 
stream's'.'--- > - * ‘ . 

2. ' Defects' on the Road System : After .1855, when the 
roads came in- charge of the-P.W.D., the influence of railways cm 
the construction of roads began to ni^ke itself .felt. As the rail- 

1* Report of the Royal Commission on Agriculture. 



392 


ECONOMICS OF INDIA AND PAKISTAN 


way system extended, it became increasingly necessary to build 
roads to feed the railways rather than to compete with them.’^ 
In spite of this, however, “ 30 per cent, of the metalled roads in 
India are parallel to railways and 48 per cent of railways have 
metalled roads parallel with them or within 10 miles,"^*^ Such is 
the tragedy of roads in India which were built not with an eye to 
the economic advancement of the country. The Government 
of India were more anxious to build railways in the last century ; 
in 70 years no less than 37,000 miles of railways were laid (a fine 
achievement) while roads were generally neglected till recently. 
This has been in spite of the fact that highway is the first link in 
the production and distribution of agricultural commodities. 
Unless there are roads to link the rural areas with markets, the 
barest subsistence cultivation will be carried on by the people. 
Lands will lie fallow and perishable produce will run to waste. 
Improved roads could convert all this waste into wealth but 
senseless competition with railways should be avoided at all costs 
in any future construction of roads. 

3, Economic Advantages of Roads ; The main advantage 
offered by road transport is its flexibility. Motor lorries and 
buses can easily collect and distribute loads from door to door 
and pick up and put down passengers anywhere needed. Rail- 
ways are fixed to their tracks and cannot undertake this kind of 
work. A road transport company can easily try routes and ply 
its vehicles where it gets better custom. It does not need much 
capital to start a concern of this type nor does it need much 
traffic to earn fair dividends. 

Rural areas cannot possibly be served by railways as the dis- 
tances are small and traffic insufficient. What is needed is a net- 
work of roads to reach the railheads. These roads will not only 
serve the villages, but will supplement the railways and add to 
their income. 

In 1939, the total number of motor . vehicles in India was 
li60,000 of which 40,000 were heavy -buses and lorries.'^ This is 
nothing as compared with other countries. The following table 
will give a comparative idea 

NUMBER OF PERSONS PER MOTOR VEHICLE IN 
SOME COUNTRIES 

U.S A,--.4. U K.— 25. Japan-640. India— 2,430. 

It must not, however, be forgotten that India has a large 
number of bullo